TMI Blog1976 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... . 97,069 for assessment year 1959-60. Subsequently, it was found by the Income-tax Officer that in the statement of computation of property income filed by the assessee at the time of the original assessment, property taxes of Rs. 27,098 received from the tenants in the previous year relevant to assessment year 1958-59 and Rs. 26,477 in the previous year relevant to assessment year 1959-60 were not taken into account. Although the amount of municipal taxes recovered from tenants was mentioned in the profit and loss account for each of the two years, the assessee had filed a separate statement of income from house property in which the assessee did not either mention or return as income the amount of municipal tax collected from the tenants. The Income-tax Officer, therefore, considered that, as a result of such omission or failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment, income liable to tax had escaped assessment in the two years and after obtaining the sanction of the Commissioner of Income-tax, he initiated reassessment proceedings for the two years. The assessee contended that there was no omission on its part to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this statement but the item regarding recoveries of municipal taxes from tenants was not shown in either of these two statements. An amount of Rs. 27,098 was shown in the balance-sheet and profit and loss account for calendar year 1957. Similarly in the profit and loss account for calendar year 1958, an amount of Rs. 26,477 was shown and with the following note : " Less recoveries including refund for Rs. 7,1 01 for earlier year. " The return filed by the assessee-company for each of the two years showed in the part relating to income from house property " as per statement " and the statement was on the lines that we have indicated above. The main question, therefore, is whether there was sufficient disclosure of primary facts by the assessee-company at the time of original assessment. The position regarding the power of the Income-tax Officer to reopen the assessment proceedings was summarised by a Full Bench of this High Court, after referring to the several decisions of the Supreme Court and other High Courts reported till then, in Poonjabhai Vanmalidas and Sons v. Commmissioner of Income-tax [1974] 95 ITR 251 (Guj) [FB] at p. 274 of the report. The position of law has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may raise from those facts. Further, where on the evidence and material produced at the time of the original assessment the Income-tax Officer could have reached a conclusion other than the one which he has reached, the proceeding under section 34(1)(a) will not lie merely on the ground that the Income-tax Officer had earlier raised an inference which he may later regard as erroneous." After this decision of the Full Bench there have been two subsequent decisions of the Supreme Court dealing with the same point. In Income-tax Officer v. Nawab Mir Barkat Ali Khan Bahadur [1974] 97 ITR 239 (SC) the Supreme Court observed, inter alia, that having second thoughts on the same material did not warrant the initiation of proceedings under section 147 and the Supreme Court observed that the law had not changed since the original assessments and it was open to the Income-tax Officer at the time of the original assessments to make the presumption that the three ladies were the legally wedded wives of the assessee. If he, should have but did not do so, then he could not avail of section 147 to correct that mistake. The conditions precedent to the exercise of the jurisdiction under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him when he made the original assessment. He cannot now take recourse to section 147(a) to remedy the error resulting from his own oversight." We may point out that after the decision of the Full Bench in Poonjabhai Vanmalidas and Sons [1974] 95 ITR 251 (Guj) [FB] in Ahmedabad Cotton Mfg. Co. Ltd. v. Union of India [1974] 95 ITR 639 (Guj) this court had observed that even though there was some omission on the part of the assessee concerned in disclosing fully and truly all material facts necessary for the assessment of the assessee-company for the assessment year under consideration by failing to refer to the amount of initial depreciation that had been granted to it in the past, yet there was also dereliction of duty on the part of the Income-tax Officer in not performing his part of the duty. The Division Bench observed: " However, the question then arises whether the income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the petitioner to disclose fully and truly such material facts just as there was a duty on the part of the petitioner to see to it that the allowance of initial depreciation was disclosed by it, there was also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 34(1)(a) of the Act of 1922, equivalent to section 147(a) of the Act of 1961. Before we proceed further with the case, we must look at what weighed with the Income-tax Officer when he issued the notice under section 148 for reopening the assessment. In the assessment order in reassessment proceedings for assessment year 1958-59 and similarly in the assessment order for assessment year 1959-60 in reassessment proceedings, the Income-tax Officer observed: " The original assessment was made under section 23(3) of the old Act on October 23, 1959, determining the total income at Rs. 90,581. The assessee derives income from property. Subsequently, it was ascertained that-- ' In the computation of property income filed by the assessee at the time of original assessment, property taxes of Rs. 27,098 recovered from the tenants in this year was not taken into account. The amount of municipal taxes recovered from the tenants was mentioned in the profit and loss account. But the assessee prepared and filed a separate statement for computation of income from house property admitted in the return filed and in that the assessee did not either mention or treat as income the amount of municip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romise decree was passed for the sum of Rs. 5,50,500 in full satisfaction of the mortgagee's claim. The amount of the decree was payable by October 1, 1944, and the debt due under the decree was subsequently discharged. For the assessment year 1944-45, the assessee was assessed to tax as karta of his Hindu undivided family by the Income-tax Officer, Trichy. Pending the assessment proceedings, that officer received information from the Income-tax Officer, Erode, that P had paid secretly to the mortgagee during the relevant accounting period a sum of Rs. 1,50,000 which was not included in the compromise decree. The assessee, however, denied having received that amount. Referring to the assessee's denial the assessing officer recorded in the order sheet on May 27, 1945: " The Income-tax Officer, Erode, should be asked to give further details and to ask P to produce evidence of payment. In any event, this should come up for consideration only in the assessment year 1945-46, as only the excess over Rs. 2,76,000 plus legal expenses can be treated as interest income in the hands of the assessee and so the assessment for 1944-45 should not be held up pending further investigation." The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(a) are satisfied." It is thus clear that in this particular case of Chidambaram Chettiar [1971] 80 ITR 467 (SC) the Supreme Court was dealing with a case of clear suppression of material facts or withholding of primary facts from the Income-tax Officer in the course of the original assessment proceedings. It was not a case like the present one where some facts were in fact disclosed but the inferences which could be drawn from those facts were not pointed out to the Income-tax Officer. Mr. Kaji also relied on the decision of a Division Bench of this High Court in Jai Hind Printing Press v. Commissioner of Income-tax [1972] 86 ITR 309 (Guj). In that case the assessee, a registered firm carrying on the business of printing and publishing newspapers, sold a rotary machine on October 28, 1956. Capital gains realised after March 31, 1956, had been made assessable by introduction of section 12B in the Indian Income-tax Act, 1922. The assessee did not make any entry in section A of Part I of the returns under the head " Capital gains " for the accounting year 1955-56, ending November 2, 1956. In Part VII requiring particulars of capital, gains the entry made by the assessee was " n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts as distinguished from some disclosure of facts as in the case before us. In Commissioner of Income-tax v. Malegaon Electricity Co. (P.) Ltd. [1966] 62 ITR 789 (Bom), the facts before the Bombay High Court were that during the course of the accounting year, the assessee-company had sold its concern to another company under an indenture dated September 19, 1951, for a consideration of Rs. 9,35,246-15-8. The assessee-company did not disclose in its return the excess of the sale price of plant, building and machinery over the written down value either in the sections relating to the total income or in section D claiming that it was not taxable under any other provision of the Act. During the course of the assessment, on 2nd July, 1953, the assessee sent a letter to the Income-tax Officer stating that the assessee was enclosing therewith copy of the directors' resolution and other documents relating to the sale and the break-up of the sale price. An assessment was made without reference to the excess sale price. Some time after completing the assessment, the Income-tax Officer realised that profits falling within the ambit of section 10(2)(vii) of the Indian Income-tax Act, 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclose that the assessee-company had made profits otherwise than by disclosing them in its return, and, in our opinion, rightly. The section nowhere says that the disclosure of all material facts must necessarily be in the return." At page 807 of the report he further observed--See [1966] 62 ITR 789 (Bom): " In the instant case the material fact that the sale price secured by the assessee was in excess of the written down value has not been disclosed anywhere in a sufficiently clear manner. The only argument is that it could have been ascertained from the material on record and, therefore, it was a full disclosure." Mr. Kaji for the assessee has relied upon the fact that the Division Bench of the Bombay High Court in Malegaon Electricity Company's case [1966] 62 ITR 789 (Bom) held that the case fell in section 34(1)(a) of the Act of 1922 equivalent to section 147(a) of the Act of 1961, because what was required to be disclosed was not disclosed in a sufficiently clear manner and that though there was some disclosure, it was not a full and true disclosure of all the facts necessary for the assessment in that particular case. Against the decision of the Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had not shown in its return for the relevant assessment year submitted to the Income-tax Officer the written down value of the assets sold and because of the non-disclosure of the written down value of the assets, it was held that if the case otherwise came under section 10(2)(vii) there was non-disclosure on the part of the assessee-company. We are unable to accept Mr. Kaji's contention that this case of the Supreme Court and the observations of the Bombay High Court apply to the present case. In the instant case the assessee has not suppressed material facts as was the case in Jai Hind Printing Press's case [1972] 86 ITR 309 (Guj). He has not failed to disclose in the documents submitted to the Income-tax Officer the amounts of the recoveries of municipal taxes from the tenants. Actually, in the profit and loss account one finds that in each of those two assessment years, the total amount of rates and taxes were first shown and the recoveries were shown as deductions from those amounts of rates and taxes. Therefore, to any person reading the profit and loss account it would be obvious that these recoveries, namely, Rs. 27,098 in one case and Rs. 26,477 in the other case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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