1966 (10) TMI 20 - HC - Income Tax

Court Validates Income-tax Section 34(1A) | Jurisdiction Upheld, Remand Order Legal

Sheo Nath Singh Versus Appellate Assistant Commissioner of Income-Tax (Central Range), Calcutta

The court upheld the validity of Section 34(1A) of the Income-tax Act, 1922, rejecting the petitioner's argument that it violated Article 14 of the ... Assessee filed a appeal against order of reassessment proceeding to AAC, which was pending. Assessee also filed writ petition in High Court - since applicant has appealed to the AAC, which appeal is not only pending, but the proceedings are being actively pursued and the petitioner says that he will continue to pursue it, he should not be allowed to pursue this application in the writ jurisdiction Issues Involved:1. Validity of Section 34(1A) of the Income-tax Act, 1922, under Article 14 of the Constitution.2. Jurisdiction of the Income-tax Officer under Section 34(1A) based on 'reason to believe' that income had escaped assessment.3. Legality of the remand order by the Appellate Assistant Commissioner.4. Use of disclosures made before the Income-tax Investigation Commission by the Income-tax Officer.Detailed Analysis:1. Validity of Section 34(1A) of the Income-tax Act, 1922, under Article 14 of the Constitution:The petitioner argued that Section 34(1A) is discriminatory and violates Article 14 of the Constitution. However, this point was conceded by the petitioner as being covered by the Supreme Court decisions in K. S. Rashid & Sons v. Income-tax Officer and Commissioner of Income-tax v. Shahazada Nand, which upheld the validity of Section 34(1A). The court affirmed that the section does not violate Article 14 and is not ultra vires.2. Jurisdiction of the Income-tax Officer under Section 34(1A) based on 'reason to believe' that income had escaped assessment:The petitioner contended that the Income-tax Officer lacked jurisdiction as the precondition of 'reason to believe' was not satisfied. The court examined the assessment orders and the remand order by the Appellate Assistant Commissioner, which indicated that the Income-tax Officer had sufficient reason to believe that income had escaped assessment. The court noted that the petitioner had disclosed the sale of shares in 1945-46, but subsequent information suggested that these transactions were business operations rather than mere investments. The court found that the Income-tax Officer had ample reason to believe that income had escaped assessment, fulfilling the precondition under Section 34(1A).3. Legality of the remand order by the Appellate Assistant Commissioner:The petitioner argued that the Appellate Assistant Commissioner had improperly remanded the matter. The court clarified that the Appellate Assistant Commissioner acted under Section 31(2) of the Income-tax Act, which allows for further inquiry before disposing of an appeal. The court rejected the petitioner's claim that the Appellate Assistant Commissioner had partially decided the matter or directed a reassessment, affirming that the remand was for further inquiry and not a reassessment.4. Use of disclosures made before the Income-tax Investigation Commission by the Income-tax Officer:Although initially raised, this point was not pressed during the hearing. The court noted that the Income-tax Officer is entitled to call for documents and materials under Section 37 of the Income-tax Act. The court found no argument to counter this contention and ruled against the petitioner on this point.Conclusion:The court dismissed the application, discharging the rule and vacating all interim orders. The petitioner failed to establish that Section 34(1A) was ultra vires or that the Income-tax Officer lacked jurisdiction. The remand order by the Appellate Assistant Commissioner was found to be lawful, and the use of disclosures by the Income-tax Officer was upheld. The court emphasized that the petitioner could not pursue parallel proceedings, thus upholding the preliminary objection raised by the respondent.