AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1958 (10) TMI 42
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.... of the notice present before the Income-tax Officer who issued the notice. The facts which were then present before the Income-tax Officer appear to me as follows: The petitioner belonged to a family consisting of about 18 members at the relevant period. The genealogy of the family as appearing from the analysis of the list exhibit A to the petition is as follows: Laxminarayan Jagannath Kedarnath Badriprasad Dwarka- nath Radhakant (P) Ramakant (P) Ramnath Ramesh- chandra Kailash- nath(P) Baikunth- nath Prabhadevi Rajeshwari Brijeshwri Vishwa nath (P) Shrinath Shivnath Krishna-devi It appears that one Laxminarayan had four sons, Jagannath, Kedarnath, Badriprasad and Dwarkanath. These four brothers in their turn had their children whose names appear in the genealogy mentioned above. Between 1949 and 1953 Radhakant and Ramakant being the sons of Jagannath along with Kailashnath, a son of Badriprasad, and Vishwanath, a son of Dwarkanath, carried on partnership business in the firm name and style of Messrs. Khandelwal Metal and Engineering Works. During that period Radhakant, the petitioner, as a partner appeared to have made large profits. He was then also getting ....
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....ngly acting under section 34 in the first instance issued a notice dated February 28, 1957. This notice was issued by mistake in connection with the wrong year. The Income-tax Officer issued another notice dated April 2, 1957, in pursuance of the provisions of section 34 of the Act. The relevant part of this notice runs as under: "Notice under section 34 of the Indian Income-tax Act, 1923 (XI of 1922). I0-r (ii)/57-58 Income-tax Office CCC-Ward Date April 2, 1957. **** Whereas I have reason to believe that your income assessable to income-tax for the year ending 31st March, 1952, Asst. Year 1951-52 has (a) escaped assessment. I therefore, propose to assess the said income that has escaped assessment. I hereby require you to deliver to me not later than...or within 35 days of the receipt of this notice, a return in the attached form of your total income and total world income assessable for the said year ending 31st March, 1952. This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Bombay City II.... **** (Sd.) V. Savera IIth Income-tax Officer, III Ward, Bombay." Having regard to the existence of the aforesa....
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....r details for ascertaining the nature of the three amounts of ₹ 20,000 deposited in the three bank accounts with which the petitioner was directly concerned. To prevent further investigations the petitioner served two notices, one dated April 9, 1958, and another dated April 15, 1958, on the first respondent, copies of both of which are exhibit D to the petition. By the first notice the petitioner challenged the validity of the notice dated April 2, 1957, and by the second notice the petitioner called upon the first respondent to appoint time for giving inspection to the petitioner of the record showing the reasons recorded by the income-tax Officer in writing for enabling him to proceed under section 34 of the Act. On these facts the first contention urged before me for the petitioner was under sub-paragraphs (d) and (e) of paragraph 18 of the petition. The grounds contained in these two sub-paragraphs are based on the assumption that the notice dated April 2, 1957, was issued under the provisions of sub-clause (b) of section 34(1). There is no basis for such assumption. Under this sub-section notice is issued when an assessee has not for himself been guilty of non-disclos....
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....nt proceedings under sub-clause (a) of section 34(1) in all cases where he believes that the income of the assessee has escaped assessment by reason of failure to disclose truly or fully material facts I cannot accept the contentions made by Mr. Nariman. I cannot understand why, because the petitioner had only two sources of income, it was not possible for the Income-tax officer having regard to the facts before him to believe that the petitioner had not disclosed fully and truly the material facts necessary for his assessment for the relevant year. The Income-tax Officer had with him information relating to the three accounts where in deposits were made and which three accounts stood in the name of the petitioner and/or his minor daughter. If explanation given to the Income-tax Officer prior to April, 1957, in respect of these accounts were altogether insufficient I cannot understand why was it not permissible for the Income-tax Officer to believe that the amounts deposited in these accounts were the income of the petitioner. The income might have been from these two sources. The income might have been the concealed profits of the partnership. It is not as if the Income-tax Office....
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....arent on the notice in question to show that the Income-tax Officer was proceeding under sub-clause (b) of that section. On the contrary if one refers to the statement in that notice, viz., "this notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Bombay City II." It is apparent that the Income-tax Officer was proceedings under sub-clause (a) of the section. If one looks at the third proviso to section 34(1) of the Act, the Income-tax Officer is bound not to issue a notice under sub-clause (a) of section 34(1) unless he has recorded his reasons for doing so and unless the Commissioner is satisfied on such reasons recorded that it was fit case for the issue of such a notice. The impugned notice on the face of it makes mention of the fact that the Income-tax Officer had recorded his reason for issuing this notice and that the notice was issued after obtaining the necessary satisfaction of the Commissioner. The satisfaction thus referred to in this notice is not required for issuing a notice under sub-clause (b) of section 34(1). There is thus clear material on the face of the record to show that the Income- tax Officer was pr....
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....x Officer and to hold that in fact in the matter of the issue of a particular notice under section 34(1) he was proceeding under sub-clause (b) would require a detailed investigation of facts. It would not be competent or correct for the court to determine such complicated and detailed facts in a petition under article 226 of the constitution. In any view of the matter I am of the opinion that the petitioner is not entitled to relief in this case on a mere allegation or assumption that the notice dated April 2, 1957, was issued under sub-clause (b) of section 34(1) of the Act. The next contention which Mr. Nariman made arises out of ground (c) in paragraph 18 of the petition. He contends that the conditions precedent to the issue of notice under section 34(1)(a) have not been complied with. He points out that under proviso (iii) of section 34(1) the Income-tax Officer is bound to record his reason for proceeding under sub-clause (a) of section 34(1) and that these reasons must be such as must have satisfied the Commissioner. Unless these two conditions precedent are satisfied, a notice cannot be issued under section 34(1)(a). In support of his contention by was bound to prove that....
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....opinion that there is complete proof that the conditions precedent have been satisfied and nothing further need be investigated as regards the allegation that these have not been satisfied. I, therefore, negative the contention of the petitioner as contained in ground (c) of paragraph 18 of the petition. The next contention of the petitioner arises from the ground (g) in paragraph 18 of the petition. The petitioner contends that the notice dated April 2, 1957, is vague and indefinite and the respondent has not at all applied his mind to the facts and circumstances of the case. Mr. Nariman contends that any notice under section 34 must make a reference to the source or sources from which the escaped income according to the Income-tax Officer has arisen. Relying upon the language of section 34(1) he also says that the notice must comply with the requirements contained in sub-section (2) of section 22 of the Act. He says that the notice in question does not refer to the source from which the alleged escaped income arose and mentions the year of assessment wrongly. He therefore says that the notice is altogether invalid. If one looks at the provisions of section 34, there is no statu....
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....lied with and accordingly the notice was invalid. In that case the question before the court was "Whether in the circumstances of this case the notice of reassessment issued to the applicant under section 34 of the Income-tax act was invalid or illegal for failure to specify the particular source of income that had escaped assessment?" It is necessary before referring to the judgment of Beaumont, C.J., in that case to observe that in 1939 section 34 of the Income-tax Act was amended and that there is now no prescribed form containing the word "source" with reference to the escaped income. There is in existence only a printed form which is in practice used for issuing notice under section 34. The notice in this case is admittedly issued in that printed form. There is nothing that is contained in this form which is not complied with. At page 56, the learned Chief Justice observed as follows [1943] 11 I.T.R. 44 at 56: "It is said that the notice ought to have specified the particular source of income which was alleged to have escaped assessment, and reliance is placed on the form of notice given in the Income-tax Manual, which does state the source of the ....
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....of escaped income. I am therefore unable to agree that the ratio of decision in that case was that a notice under section 34 must draw the attention of the assessee to the case which he has to meet. Before I hold that a notice under section 34 must draw the attention of the assessee to the case which he has to meet, I must scrutinize in detail the language of that section and come to a finding that the assessee was entitled to such notice. I however find that in the provisions of section 34 there is nothing entitling an assessee to a notice of the case which he has to meet. After a return is made for reassessment purposes under section 34 the assessee would get information as to the case of the Department in connection with the alleged "escaped income." It is not at the initial state of the notice that he is entitled to get the information. Such information could easily be got and would be available in the subsequent proceedings. In my view the source of the escaped income cannot always be specified and is not required to be specified in a notice under section 34 of the Act. In support of this contention that the notice was vague Mr. Nariman referred me to the words of t....