1973 (6) TMI 20 - HC - Income Tax

Court upholds jurisdiction to reopen assessment based on non-genuine transaction. Delay in filing petition deemed immaterial.

The court upheld the Income-tax Officer's jurisdiction under Section 34 to reopen the assessment due to a non-genuine transaction. It found no suppression ... Assessment Notice, Notice Of Reassessment, Original Assessment, Reassessment Notice, Writ Petition Issues Involved:1. Jurisdiction under Section 34 of the Indian Income-tax Act, 1922.2. Suppression of material facts.3. Delay and laches in filing the writ petition.4. Disclosure of material facts by the assessee.5. Validity of reassessment proceedings.Issue-wise Analysis:1. Jurisdiction under Section 34 of the Indian Income-tax Act, 1922:The petitioner challenged the jurisdiction of the Income-tax Officer (ITO) under Section 34(1)(a) of the Indian Income-tax Act, 1922, which allows reopening of assessments if the ITO has reason to believe that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The ITO issued a notice under Section 34 based on an alleged cash credit of Rs. 30,000 in the petitioner's accounts, which was later found to be non-genuine. The court held that the ITO had prima facie grounds to believe that there was non-disclosure of material facts, thus justifying the reopening of the assessment.2. Suppression of Material Facts:The court initially found that the petitioner suppressed a material fact by not stating in the petition that the return was filed under protest. However, upon review, it was found that the petitioner had indeed mentioned this in paragraph 6 of the petition. The court acknowledged the oversight and noted that the return under protest was admitted by the respondents.3. Delay and Laches in Filing the Writ Petition:The court considered the delay in filing the writ petition, noting that the petitioner took no steps to challenge the notice under Section 34 between July 3, 1961, and September 14, 1964. The petitioner argued that the delay was immaterial in cases where the jurisdiction of the authority is in question. The court agreed that in cases of patent lack of jurisdiction, delay is not a bar to relief. The court found that the delay was not significant given the circumstances and the inaction of the ITO in proceeding with the reassessment.4. Disclosure of Material Facts by the Assessee:The petitioner contended that all material facts were fully and truly disclosed during the original assessment, including the explanation for the cash credit. The court, however, held that the disclosure must be both full and true. The ITO's subsequent enquiry revealed that the transaction was not genuine, indicating that the petitioner's disclosure was not true. The court emphasized that untrue or fictitious disclosure cannot be considered a true disclosure under Section 34(1)(a).5. Validity of Reassessment Proceedings:The court examined the ITO's report and the Commissioner's satisfaction for reopening the assessment. The ITO's report, based on local enquiry, suggested that the firm, M/s. International Traders, did not exist at the given address, leading to the belief that the transaction was fictitious. The court found that the ITO had reasonable grounds for his belief, and the Commissioner's satisfaction was not mechanical. The court concluded that the reassessment proceedings were valid and the ITO had the necessary jurisdiction to issue the notice under Section 34.Conclusion:The court dismissed the appeal, holding that the ITO had valid jurisdiction under Section 34 to reopen the assessment based on the non-genuine transaction. The court found no suppression of material facts by the petitioner and deemed the delay in filing the writ petition immaterial. The reassessment proceedings were upheld as valid, and the petitioner's contentions on merits were rejected. The operation of the order was stayed for eight weeks as requested by the petitioner's counsel.