TMI Blog1976 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 31, 1962, and December 31, 1964, respectively. On February 11, 1971, the assessee-company filed a petition in the constitution writ jurisdiction, original side of this court, for a writ in the nature of mandamus commanding the Income-tax Officer, "G" Ward, and the Commissioner of Income-tax, West Bengal II, Calcutta, the respondents in the petition, to act according to law and to cancel and/ or withdraw and/or rescind the notices dated March 12, 1970, and November 6, 1970. The assessee-company has also prayed for a writ in the nature of certiorari calling. upon the respondents to send the records of the case to this court in order that the said notices may be quashed or set aside and conscionable justice may be rendered. The assessee-company has further prayed for a writ in the nature of prohibition commanding the respondents to forbear from giving effect to and/or taking any steps whatsoever in pursuance of the said notices dated March 12, 1970, and November 6, 1970. In the petition the assessee-company has challenged the said notices on the ground that the notices are illegal, invalid and inoperative because the condition precedent for assumption of jurisdiction under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company received the said three notices dated March 12, 1970, and November 6, 1970, under section 148 of the Act issued by the Income-tax Officer, "G" Ward, whereby the assessee-company was called upon to submit a return of income for the said assessment years within 30 days from the date of service of the notices as the Income-tax Officer had reason to believe that the petitioner's income chargeable to tax for the said assessment years had escaped assessment within the meaning of section 147 of the Act. The assessee-company filed return of income for the said assessment years in response to the said notices under protest as no income had escaped assessment due to omission or failure on the part of the assessee-company to disclose fully and truly all primary and relevant facts. Subsequently, it was ascertained that the notices under section 148 of the Act were issued as a result of the report of the underground measurement made by the mining officials of the Government of West Bengal as disclosed by the Income-tax Officer in his letter dated February 27, 1970, addressed to the principal officer of the assessee-company. Thereafter, the assessee-company made this application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment from the report of the mining authorities." According to the learned judge: " The Income-tax Officer cannot take any action under section 147(a) except under clause (b) of section 147 where the Income-tax Officer has in consequence of information in his possession reason to believe that income has escaped assessment." Then the learned judge observed: " From the facts disclosed in the instant case, it leads to the only conclusion, that the Income-tax Officer in consequence of information in his possession received from the Commissioner of Income-tax, has reason to believe, that income of the petitioner (assessee-company) has escaped assessment in respect of the aforesaid years." Then the learned judge held : " In the instant case it appears that the information was derived by the Income-tax Officer from an extraneous source concerning the facts relating to the matter of assessment. Nowhere it is stated in the affidavit-in-opposition that the Income-tax Officer had made an independent enquiry." The learned judge observed that the Income-tax Officer acted merely upon the information on the report received from the mining authorities and, solely relying upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat report can also be the basis of other belief that income has escaped assessment due to omission or failure on the part of the assessee to disclose fully and truly all material facts. If the report is good material for the first condition of section 147(a) then it is also good material for the second condition, namely, to disclose fully and truly all material facts necessary for the assessment for those years. Mr. Sen relied on the decision of the Bombay High Court in the case of Shriyans Prasad Jain v. R. K. Bhalla, Income-tax Officer [1974] 94 ITR 34 and submitted that in that case the Income-tax Officer relied on the finding of the enquiry commission presided over by Mr. Justice Vivian Bose and reopened the assessment and it was held, inter alia, in that case, that the Income-tax Officer had prima facie material to entertain a reasonable belief that income had escaped assessment. He contended that, in the instant case, the Income-tax Officer also relied on the report of the mining officials as a result of the joint inspection of the colliery on January 9 and January 10, 1967. In support of his argument Mr. Sen also relied on the two decisions of the Calcutta High Court, namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. When the company raised coal the same were actually weighed and the royalties due to the Government were paid. There was no dispute between the company and the coal mining authorities till March 17, 1967. The books of the company were checked and royalties were paid. This will appear from the remarks column of the statements showing raising, despatches and stocks of coal. For the assessment years 1961-62, 1963-64 and 1965-66, the assessments were duly made by the income-tax authorities. Long after the period of assessment two officers of the Directorate of Mines and Minerals of the Government of West Bengal made a joint inspection on January 9, 1967, and January 10, 1967. On the basis of underground measurement of the colliery, the officers thought that there were some under-raisings of coal during the period from 1956 to January 9, 1967, and the under-raising were in respect of Grade I coal. The assessment order of the Income-tax Officer dated September 23, 1965, in respect of the assessment year 1961-62, shows that in that year the assessee-company raised coal being "Selected A Grade". The Income-tax Officer made calculations in his own way holding that the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mining adviser and Director of Mines Minerals enclosing therein a plan depicting the various blocks for taking measurements more scientifically and for more correct calculation. The company also enclosed the method of calculation block by block and the calculation sheet. On August 10, 1970, the Director of Mines and Minerals wrote to the company that, due to depillaring operation carried out since the date of measurement, it would not be possible to get access to some of the old positions measured earlier. The above correspondence shows that there was serious dispute between the mining authorities and the assessee-company as to measurement of the under-reporting of raising of coal. While such dispute was going on, Shri H. B. Mitra, Deputy Assistant Coal Controller wrote a letter on May 14, 1969, to the Commissioner of Income-tax with the enclosure dated January 30, 1969. This letter is mentioned in the judgment of the learned judge. I shall quote the same here. "Letter from H. B. Mitra, Dy. Asstt. Coal Controller to Commissioner of Income-tax with enclosures dated 30th January, 1969. No. CE/1(1) Government of India, Ministry of Petro-Chemicals, Mines Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcutta-1. No. C-II/S-353/G Dated 27th February, 1970 To The Principal Officer, Selected Dalurband Coal Co. (P) Ltd. 137, Cotton Street, Calcutta. Dear Sir, Re: Asstt. years 1957-58 to 1960-61 I understand that as a result of underground measurement of your colliery on 9th January, 1967, and 10th January, 1967, by mining officials of Govt. of W.B., it was found that raising was under-reported by you to the extent of 1,36,390 m.t. of Gr. I coal during the period 1956 to 9th January, 1967. Coal raising under-reported in the C. Year is estimated by me at 12,599 m.t. (i.e., 1/11th of 1,36,390 m.t.). Sale value of the said coal representing your income has escaped assessment, for truly and fully that was necessary for assessment during original assessment proceedings. I, therefore, propose to take action under section 147 for the asst. year 1957-58 to 1960-61. I am now to request you to have me your views in the matter on or before 16th March, 1970. Yours faithfully, (J. Chakraborty) I. T. O. 'G' Ward, Comp. Dt. II/Cal." It will appear from the letter dated February 27, 1970, that Shri Jyotirmoy Chakraborty, Income-tax Officer, estimated under-raising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee during the period 1955 to 1966 is 9,54,489 m.t., raising under-reported works out at 14.3% of raising shown. Raising under-reported in 1962 C. Yr. (corresponding to 1963-64 asstt. yr.) is estimated by me on the basis of 14.3% of raising disclosed by assessee at 19,415 m. t. Rs. 4,20,141 being value of 19,415 in. t. of coal @ average sale rate of Rs. 21.74 per m. t. represents, I have reason to believe, income which escaped assessment for failure on the part of the assessee in disclosing all material facts truly and fully that was necessary for their assessment. (S. K. Bhattacharyya) I. T. O., 'G' Ward, Comp. Dt. II/Calcutta. In course of argument Mr. Pal pointed out that Shri Jyotirmoy Chakraborty, Income-tax Officer, 'G' Ward, in his affidavit affirmed on July 2, 1972, stated that the letter dated January 30, 1969, from the Chief Mining Adviser, Government of West Bengal, addressed to the Coal Superintendent, Dhanbad, and others was " forwarded to and/or received by me". He also stated in the affidavit : " I have reason to believe and I bona fide believed that the income of the petitioner, chargeable to tax escaped assessment within the meaning of section 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tirmoy Chakraborty, Income-tax Officer, reopened the assessment on the basis of the report dated January 30, 1969, as stated by him in his affidavit. Mr. Sen, then, referred to two decisions of the Calcutta High Court : (1) Nand Kishore Jhajharia v. Income-tax Officer [1973] 89 ITR 229 and (2) Grahams Trading Co. (India) Ltd. v. Income-tax Officer [1976] 105 ITR 1 and relied on the judgment delivered by me in the unreported Division Bench decision of this court in Madhani Engg. Works v. Income-tax Officer. Mr. Pal then continued his argument on behalf of the assessee-company and submitted that if Shri Jyotirmoy Chakraborty had examined the records and formed his belief as stated by him in his affidavit affirmed on July 2, 1972, and if he recorded his reasons for the assessment years 1961-62, 1963-64 and 1965-66, he should have verified his affidavit stating that the above facts are true to his knowledge. But he had not done so. He verified the relevant paragraphs as "based on information received from records and believed to be true by me". Mr. Pal also pointed out that Shri S. K. Bhattacharyya, Income-tax Officer, also affirmed on affidavit on December 20, 1972, wherein he stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years in question due to omission or failure on the part of the assessee-company to disclose fully and truly all material facts. It is well established principle of law that to confer jurisdiction under section 148 of the Act to issue notice for the assessment beyond the period of four years but within the period of eight years from the end of the relevant assessment year the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed and he must have also reason to believe that such "under assessment" has occurred by reason of either, (i) omission or failure on the part of an assessee to make a return of his income, or (ii) omission are failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent [see Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC)]. Both the conditions are cumulative and both must exist before notice could be issued under section 148 of the Act. In his affidavit, the Income-tax Officer stated : "I say that the report of underground measurement of coal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to January 9, 1967. Thus under-reporting was for a period of 11 years. This under-reporting during the period of 11 years was the result of an enquiry made long afterwards, i.e., on January 9, 1967, and January 10, 1967. So under-reporting for these 11 years was not based on specific facts, but was really an inference drawn from facts specifically found later on. The report says what inference was drawn during the period of 11 years. It says: "Gr. I- 1,36,390 m.t.". This is, in substance, the report. In order to assume jurisdiction to issue notice the Income-tax Officer must not only have reason to believe that income has escaped assessment during the assessment years in question, but he must have reason to believe that such escapement has been due to omission or failure on the part of the assessee-company to disclose fully and truly all material facts necessary for the assessment years in question. On the report it cannot be said that during the assessment years in question for which the notices were issued there was under-reporting of coal by the assessee-company to the mining authorities. The Income-tax Officer did not reopen the assessment for all the period covered by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer as to the under-reporting of actual raising of coal. The report relates to under-raising of Grade I coal. But the assessment order dated September 23, 1965, for the assessment year 1961-62 shows that the assessment was made in respect of selection "A" grade coal. Thus, the Income-tax Officer had all the documents and papers necessary for the assessment of the assessee-company for the relevant assessment years in question. The Income-tax Officer did not accept the raising account of the assessee and made assessment of his own. Therefore, it seems to me that the Income-tax Officer had no valid reason to believe that the assessee-company omitted or failed to disclose fully and truly all material facts necessary for assessment for the assessment years in question. The Income-tax Officer had all the materials before him when he made the original assessment. So the Income-tax Officer could not take recourse to section 147(a) of the Act. The learned counsel for the appellants has argued that if the Income-tax Officer has formed the belief that income had escaped assessment, automatically he can form a belief that there was failure on the part of the assessee-company to stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(a) will also be satisfied. I will follow the principles laid down by the Supreme Court in Assistant Controller of Estate Duty v. Nawab Sir Mir Osman Ali Khan Bahadur [1969] 72 ITR 376, where the Supreme Court held that the opinion of the Central Board of Revenue regarding the correct valuation of securities for purposes of estate duty, expressed in an appeal prepared by the accountable person, is "information" within the meaning of section 59 of the Estate Duty Act, 1953, as amended by the Estate Duty (Amendment) Act of 1958, on the basis of which the Controller can entertain a reasonable belief that property assessed to estate duty has been under-valued. The other case referred to in this respect by Mr. Pal is the decision of the Assam and Nagaland High Court in Bajranglal Beria v. Income-tax Officer [1972] 85 ITR 335. In that case, it was held that the Income-tax Officer's prima facie justification for reason to believe was based upon his subsequent information and not upon anything already found on the records and, therefore, it fell under section 147(b) and not under section 147(a) of the Act. In my view the same reasoning is applicable in the instant case also. With rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mining officials constitutes sufficient materials for issue of notice under section 148 of the Act, Mr. Sen has relied on several decisions. I shall now discuss the same. In Shriyans Prasad Jain v. R. K. Bhalla, Income-tax Officer [1974] 94 ITR 34 (Bom) on the report of a commission of enquiry the assessment was reopened. It was decided in that case, that the Income-tax Officer had prima facie material to entertain the reasonable belief that income had escaped assessment and that the Income-tax Officer had not acted improperly. It appears from the judgment in that case that the Commission of enquiry was appointed by the Central Government under the Commissions of Enquiry Act 9 of 1952 to enquire into and report on the administration of nine companies, the nature and extent of the control, direct and indirect, exercised over such companies and firms or any of them by Shriyans Prasad Jain, the petitioner in that case, the relatives, employees and persons concerned with them and other matters mentioned in clause (1) of the notification. The Commission was presided over by Mr. Justice Vivian Bose, judge of the Supreme Court. The report related to payment of Rs. 7,00,000 compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation, but also on the seized documents. Again with regard to the report it was held by the learned judges at page 29 of the report : " The said report shows that there is some basis for the Income-tax Officer to issue the notices under section 147. From the said report and the pleadings of the parties it transpires that the Income-tax Officer had reasons to believe that the assessee was under-assessed due to the failure or omission to disclose truly and fully certain amounts which have escaped assessment." Therefore, the facts of that case are distinguishable from the facts of the instant case. In the matter of Smt. Nirmala Birla v. Wealth-tax Officer [1976] 105 ITR 483(Cal) [FB], the Wealth-tax Officer wanted to reopen assessment on the basis of certain reports. Notices were issued under section 17 of the Wealth-tax Act, 1957, within four years from the end of the assessment year. So, both clauses (a) and (b) of section 17 of the Act apply in this case. Sankar Prasad Mitra C.J., at page 497, held : " If we find that some information did come to the knowledge of the Wealth-tax Officer which was not known to him before and on the new facts that were brought to light a bel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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