TMI Blog1976 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... shment of the petitioner-corporation under the provisions of the Road Transport Corporation Act, 1950, the State of Bihar was operating and running a fleet of buses on various routes in the State, which was known as "Bihar Rajya Transport". In pursuance of the scheme of the said Act, all the assets of the Bihar State Rajya Transport was transferred to the corporation, the capital of which was contributed by the State of Bihar and the Indian Railways, for providing road transport facilities to the general public in the State. The petitioner is said to have received, on transfer, the vehicles at the original cost price shown in the documents of the Rajya Transport which stood at Rs. 1,53,72,599 as also the other assets, such as building, etc., at the value of the original cost. It, however, appears that the Rajya Transport was maintaining a separate account as "Depreciation Reserve" in which it was crediting the amount year after year, representing the depreciation value of the assets and the total amount standing in the said reserve account was to the tune of Rs. 19,07,258. These figures were mentioned in the balance-sheet of the Rajya Transport, which was prepared by the State Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the actual cost of the assets must be reduced by the aforesaid amount on the date of the take-over and that depreciation for the year in question "ought to have been allowed by the Income-tax Officer on the net cost of the vehicles of Rs. 41,03,346, and not on the original cost of the vehicles as shown in the balance-sheet of the corporation ...... Thus depreciation allowed by the Income tax Officer in this order under section 154 dated 17-8-66 .................. was based on wrong amount by mistake which is apparent from the records ". A similar view was taken with respect to the depreciation reserve received by the petitioner with respect to other assets representing the building, and depreciation was allowed on the assets on the written down value less the depreciation reserve. On appeal, the Appellate Assistant Commissioner by his order dated September 30, 1969 (a copy of which is annexure "4") remanded the matter to the Income-tax Officer principally on the ground that no reasonable opportunity was afforded to the petitioner to explain the various materials against him. After remand, the Income-tax Officer by his order dated November 14, 1969 (a copy of which is annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent-Income-tax Officer to the issuance of the notice in question, nor the details of the order passed on its objection has been stated. Mr. Jain, however, on our inquiry informed us that the rejection was oral. Be that as it may, in the writ application as well, no statement of the relevant facts has been made as to raise the grounds on which the issuance of the notice under section 148 can be impeached by the petitioner. In other words, the necessary factors have not been suffIciently stated, on which this court can examine the question as to whether the conditions precedent for exercise of the powers under section 147 of the Act did exist or not. The petitioner has simply stated the diary of events and then, under the "reasons" challenging the notice, it has urged that the notice under section 148 was without jurisdiction "inasmuch as there are no reasons to believe that any income has escaped assessment" and that it was "barred by limitation inasmuch as the proceedings have been initiated much beyond four years as con templated under the new Act for initiating the proceeding under section 147(b)". A counter-affidavit has been filed on behalf of the respondents, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. While section 154 deals with mistakes apparent from the records and may not cover a case where a reassessment has to be made to charge tax, if it has escaped assessment, section 147 covers cases of income escaping assessment where the Income-tax Officer has reason to believe, in consequence of information in his possession for that purpose, and is not confined to cages where the assessee has concealed his income. In cases where reassessment under section 147 or rectification under section 154 are both equally competent, the department may take action under either section, since the two sections are not materially exclusive. Reference in this connection may be made to the case of Salem Provident Fund Society Ltd. v. Commissioner of Income-tax, where after completion of the assessment of the assessee, when the Income-tax Officer discovered some mistakes, he proposed rectifying the same under section 35 of the old Act (now section 154), but later initiated reassessment proceedings under section 34 (now section 147). When the reassessment proceedings were challenged, it was held that the proceedings were valid as "information" for the purpose of section 34 need not be wholly extrane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erves were mentioned in the balance-sheet and the schedule attached to the balance-sheet, on the basis of which the petitioner had purchased the undertaking from the Rajya Transport. The Income-tax Officer in the original order of assessment dated February 11, 1965, has also referred to the "opening balances in the balance-sheet " and has computed the total income " after examination of the books of account produced ", on which strong reliance was placed by Mr. Jain in support of his contention that for these reasons it could not be said to be a case covered by section 147(a). In short, the stand of Mr. Jain is that although the petitioner might have failed to disclose all the primary facts truly and fully while making the return, still there was no occasion for applying the provisions of clause (a) of section 147 for the simple reason that in the course of the assessment proceeding, all the relevant and material facts were placed, including the books of account of the petitioner and the balance-sheet prepared by the Rajya Transport, on the basis of which the undertaking was purchased by the petitioner, so much so that the Income-tax Officer had actually mentioned of having himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as a non-resident. The assessee disclosed the facts of having a current account with a bank in Bombay where sale proceeds in respect of large quantities of ghee supplied outside the taxable territories were credited in that account and then transferred to Porbander. The assessee had also a current account with a firm in Bombay. The assessee disclosed these facts to the Income-tax Officer and also produced the pass books. On this contention that he had no business in the taxable territories nor any other than the income of interest from which tax had already been deducted at the maximum rate, the assessment proceedings were dropped, but in 1956, a proceeding for reassessment under section 34(1)(a) was initiated. It was under those circumstances that it was held that the assessee had disclosed all relevant and primary materials and, " no more detailed disclosure was necessary to comply with the requirement that the assessee had fully and truly to disclose all material facts necessary for the purpose of assessment. It was not the respondent's duty to disclose to or instruct the Income-tax Officer that there were profits embedded in the receipts' of the money at Bombay." It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the respondents by Mr. Rajgarhia, namely, Commissioner of Income-tax v. Hoosen Kasam Dada (India) Ltd. where a Bench of the Calcutta High Court, after considering both the aforesaid cases of the Supreme Court, and some other cases, observed that making of a return by an assessee is not a mechanical job. The assessment should be clear and intelligible. It must highlight the necessary feature in the income and expenditure in the profit and loss account. That is what is called making a return or statement. The facts of this case may also be usefully indicated. In the course of the assessment proceeding the assessee had shown the sum of Rs. 61,352-12-6 as "reserve for exchange--being exchange surplus on remittance from Pakistan" according to the balance-sheet. This account was the profit arising out of the remittance made from Pakistan. The balance-sheet was laid before the Income-tax Officer when the original, assessment was made for the assessment year 1955-56, but he did not tax the exchange surplus in the assessment. Later on, however, the Income-tax Officer issued a reassessment notice Which was challenged on the ground that the fact was already placed before the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it to state that there is a prima facie evidence of nondisclosure fully and truly of all the material facts, in consequence whereof income had escaped assessment, and final decision about the failure to disclose fully and truly all material facts, appearing on the assessment of income, and consequent escapement of income from assessment and tax, could be recorded in the proceedings by the Income-tax Officer himself. At this stage this court is only called upon to decide whether the conditions which invested the Income-tax Officer with power to reopen the assessment did exist. The answer to this question has already been recorded earlier against the petitioner and once this is so, the notice issued under section 148 (a copy of which is annexure "8" to this application) by the Income-tax Officer cannot be quashed by this court. Mr. Jain also made an argument that the respondents have taken recourse to the rectification proceeding under section 154 of the Act which, on the facts of the present case, amounted to cover the entire field of the purported reassessment sought to be made under section 147, it was not open to them to prosecute two reme dies simultaneously. I do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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