1971 (1) TMI 6 - SC - Income Tax

Supreme Court affirms invalid reassessment proceedings for assessment years 1947-50

The Supreme Court dismissed the appeals, affirming the High Court's decision that the reassessment proceedings under section 34(1)(a) were invalid for the ... It is not for the assessee to satisfy the Income-tax Officer that there was no concealment, it was for the department to establish that the assessee had failed to disclose truly and fully material facts when the assessee had intimated about the receipt - department cannot commence proceedings for reassessment under s. 34(1)(a) - Revenue's appeal dismissed Issues Involved:1. Jurisdiction of the Income-tax Officer to initiate reassessment proceedings under section 34(1)(a) of the Income-tax Act, 1922.2. Whether the assessee fully and truly disclosed all primary facts necessary for the assessment of income for the years 1947-48, 1948-49, and 1949-50.3. Validity of the reassessment proceedings initiated by the Income-tax Officer.Detailed Analysis:1. Jurisdiction of the Income-tax Officer:The Income-tax Officer, Porbandar, initiated reassessment proceedings under section 34(1)(a) of the Income-tax Act, 1922, for the assessment years 1947-48, 1948-49, and 1949-50. The assessee challenged the jurisdiction on the grounds that it had fully and truly disclosed all primary facts necessary for the assessment. The Income-tax Officer rejected this plea and brought the income which had allegedly escaped assessment to tax. Appeals filed by the assessee to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal were dismissed.2. Disclosure of Primary Facts:The High Court of Gujarat held that all primary facts relevant to the assessment of the income of the assessee were disclosed by the assessee. For the assessment years 1947-48 and 1948-49, the Income-tax Officer had initially dropped the proceedings, observing that the assessee, a non-resident, had no business in British India and that the sale proceeds from ghee delivered at Porbandar were credited in a bank account in British India and subsequently transferred to Porbandar. The Tribunal, however, observed that the statements made by the assessee's representative did not furnish particulars about the delivery of goods or the price of the goods, leading to the conclusion that there was no full and true disclosure of material facts.3. Validity of Reassessment Proceedings:The Supreme Court agreed with the High Court's view that the Tribunal misconceived the nature of the proceedings and the duty imposed upon the assessee by section 34(1)(a). It was emphasized that it is not the duty of the assessee to satisfy the Income-tax Officer that there was no concealment; rather, it is for the Income-tax Officer to establish that the assessee failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment. The failure to disclose how the delivery of ghee was given at Porbandar was deemed irrelevant, and the failure to furnish particulars in that regard could not assist the department's case. The Supreme Court held that the Income-tax Officer was apprised of all the primary facts necessary for assessment and had initially dropped the assessment proceedings. Therefore, he was not competent to commence reassessment proceedings under section 34(1)(a) based on a change of opinion.Conclusion:The appeals by the Commissioner of Income-tax were dismissed with costs, affirming the High Court's decision that the reassessment proceedings under section 34(1)(a) were invalid for the assessment years 1947-48, 1948-49, and 1949-50. The Supreme Court concluded that the assessee had fully and truly disclosed all material facts necessary for the assessment, and the Income-tax Officer could not initiate reassessment proceedings merely based on a different view from his predecessor.