1966 (10) TMI 14 - HC - Income Tax

Court Allows Reopening of Assessment Under Section 34(1)(a) Indian Income-tax Act

The court determined that the reopening of the assessment fell under Section 34(1)(a) of the Indian Income-tax Act, allowing it within eight years due to ... Cash credits - genuineness - reopening the assessment under s. 34 and notice was issued to the assessee under s. 34 - assessee did not fully and truly disclose all the material information necessary for the assessment - Sec. 34(1)(a) is applicable, not34(1)(b) Issues Involved:1. Applicability of Section 34(1)(a) or Section 34(1)(b) of the Indian Income-tax Act.2. Jurisdiction of the Income-tax Officer to reopen the assessment.3. Requirement for notice to specify under which section it is issued (34(1)(a) or 34(1)(b)).Issue-wise Detailed Analysis:1. Applicability of Section 34(1)(a) or Section 34(1)(b) of the Indian Income-tax Act:The core issue was whether the reopening of the assessment fell under Section 34(1)(a) or Section 34(1)(b) of the Indian Income-tax Act. Section 34(1)(a) allows reopening within eight years if there is an omission or failure by the assessee to disclose fully and truly all material facts necessary for assessment. Section 34(1)(b) permits reopening within four years based on new information leading the Income-tax Officer to believe that income has escaped assessment.The court noted that the original assessment for the year 1948-49 was made on August 22, 1949, and the income returned by the assessee was virtually accepted. During the assessment proceedings for 1950-51, the Income-tax Officer discovered certain cash credits were not genuine, leading to the reopening of the 1948-49 assessment. The notice was served on November 12, 1954, beyond four years but within eight years from the date of the original assessment.The assessee argued that this case fell under Section 34(1)(b), which prescribes a four-year limit, but the department contended it fell under Section 34(1)(a), allowing an eight-year period. The court concluded that the reopening was justified under Section 34(1)(a) because the assessee failed to disclose material facts fully and truly.2. Jurisdiction of the Income-tax Officer to Reopen the Assessment:The assessee challenged the jurisdiction of the Income-tax Officer, arguing that the reopening should fall under Section 34(1)(b) and was thus time-barred. The court rejected this contention, stating that the original assessment order did not show that the Income-tax Officer had examined the accounts or scrutinized the cash credits. The Tribunal found that the Income-tax Officer had reasonable grounds to believe the cash credits were not genuine, which justified invoking Section 34(1)(a).The court referenced previous rulings, including 'Manikonda Venkata Narasimham v. Commissioner of Income-tax' and 'Sowdagar Ahmad Khan v. Income-tax Officer, Nellore,' to support its position that non-disclosure of material facts warranted reopening under Section 34(1)(a). The court also cited the Supreme Court's decision in 'Income-tax Officer v. Bachulal Kapoor,' where it was held that the provisions of Section 34(1)(a) were justifiably invoked when there was a deliberate suppression of facts.3. Requirement for Notice to Specify Under Which Section it is Issued:The court addressed the assessee's contention that the notice to reopen the assessment must specify whether it is under Section 34(1)(a) or Section 34(1)(b). The court rejected this argument, stating that it is not necessary for the notice to specify the section. The determination of whether Section 34(1)(a) or Section 34(1)(b) applies can be made after the facts are investigated. This position was supported by decisions from the Madras High Court in 'Presidency Talkies v. First Additional Income-tax Officer' and 'P. R. Mukherjee v. Commissioner of Income-tax.'Conclusion:The court concluded that Section 34(1)(a) is applicable to the facts and circumstances of this case, allowing the reopening of the assessment within eight years due to the assessee's failure to fully and truly disclose all material facts necessary for the assessment. The department was awarded costs, with an advocate's fee of Rs. 250.