1966 (8) TMI 68 - HC - Income Tax

Court upholds notice service, assessee's non-disclosure, and income presumption.

The court found that the service of notice on the assessee was proper and valid, as the authorized agent received it. Regarding the action under section ... - Issues Involved:1. Validity of service of notice on the assessee.2. Legality and validity of action under section 34(1)(a) of the Income-tax Act, 1922.Issue-Wise Detailed Analysis:1. Validity of Service of Notice on the Assessee:The first issue addressed was whether the receipt of notice by Ram Dayal, the munim of the assessee-Hindu undivided family, constituted proper and valid service on the assessee. The Tribunal found as a fact that there was service upon the manager and the adult members of the family, although the acknowledgment due receipt was signed by Ram Dayal, the munim. Additionally, it was determined that Ram Dayal was an authorized agent to receive notices on behalf of the assessee. Consequently, the court concluded that the service of notice was proper and valid, answering the first question in the affirmative and against the assessee.2. Legality and Validity of Action under Section 34(1)(a):The second issue was whether the action under section 34(1)(a) was legal and valid. Section 34(1)(a) of the Income-tax Act, 1922, allows the Income-tax Officer to take action if there is reason to believe that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment of that year. The court noted that the burden was on the assessee to disclose all material facts for the relevant assessment year 1945-46. It was found that no facts were disclosed regarding the three cash credits introduced in the financial year 1944-45, relevant to the assessment year 1945-46.The court emphasized that the obligation to disclose all material facts is cast upon the assessee, and failure to do so can lead to the application of section 34(1)(a). The court referred to a previous decision in Jagdish Prakash Kaushik v. Commissioner of Income-tax, where it was held that mere entries in the account books do not amount to full and true disclosure. The court followed this precedent, concluding that the requirements of section 34(1)(a) were fulfilled, and the action taken by the Income-tax Officer was valid.Additionally, the court considered whether the inference drawn by the income-tax authorities that the amount of Rs. 65,000 was income for the assessment year 1945-46 was justified. The Tribunal had rejected the assessee's explanation that the amount could relate to any period between 1935 and 1940, noting that the assessee had not disclosed the source of the cash receipts. The court held that it was reasonable to presume that the amount was earned during the preceding year unless the contrary was shown by the assessee. The court found no error in law in the Tribunal's conclusion and answered the second question in the affirmative and against the assessee.Separate Judgment:M.H. Beg, J., concurred with the answers given by Manchanda J. to the two questions referred. He added that the initial action under section 34(1)(a) was legally justified, referring to a similar case, Raghubar Dayal Ram Kishan v. Commissioner of Income-tax, where it was held that section 34(1)(a) could apply in such circumstances. Beg J. also discussed the reasonableness of the presumption that the amount of Rs. 65,000 was earned during the assessment year 1945-46, emphasizing that the income-tax authorities had not acted unreasonably in raising this presumption. He concurred with the order as to costs.Conclusion:The court answered both questions in the affirmative and against the assessee, holding that the service of notice was proper and valid, and the action under section 34(1)(a) was legal and valid. The assessee was ordered to pay costs of Rs. 200 to the Commissioner, with counsel's fee also assessed at Rs. 200.