1970 (8) TMI 8

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....e assessee-company informed the Income-tax Officer by its letter of July 2, 1953, about the sale of the assessee-company to the Amalgamated Electricity Co. (Belgaum) Ltd. (to be hereinafter referred to as the "Belgaum Co."). It also brought to the notice of the Income-tax Officer the following documents : (a) Appropriate extract from the minutes of the meeting of the board of directors of the Belgaum company held on April 16, 1951, agreeing to purchase the assets of the assessee-company ; (b) Resolution passed on September 19, 1951, by the board of directors for the assessee-company deciding to sell the concern to the Belgaum company : (c) Agreement dated September 19, 1951, between the said two companies. Later on, in response to a letter from the Income-tax Officer, the assessee-company informed him the manner in which the sale price of Rs. 9,35,246-15-8 was determined. It also submitted a statement of unabsorbed depreciation. That statement set out the depreciation accrued as well as that allowed. The entire consideration for the sale was paid in cash on October 4, 1951, and the profits earned by the assessee for the period of six months ended on September 30, 1951, ....

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.... if any portion of that price can be considered as deemed profits under section 10(2)(vii), it was impermissible for the Income-tax Officer to initiate proceedings under section 34(1)(a) as the assessee had placed all the primary facts before the Income-tax Officer and, therefore, it cannot be said that it had not fully and truly disclosed all material facts. On behalf of the revenue, it was urged before the Tribunal that the part of the price realised by the sale of the assets should be deemed as profits under section 10(2)(vii) ; those profits had not been included in the return of the assessee nor had the assessee placed all the material facts necessary for determining its tax liability ; therefore, the Income-tax Officer was justified in initiating proceedings under section 34(1)(a) and at any rate the impugned assessment can be justified under section 34(1)(b). The Tribunal did not go into the question whether any part of the sale proceeds can be considered as deemed profits under section 10(2)(vii) but it held that the assessee had placed before the Income tax Officer all the primary facts necessary for its assessment and, therefore, it cannot be said that it had failed to di....

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.... as well within the scope of section 34(1)(b) ?" The High Court answered both these questions in favour of the revenue. Hence this appeal. In our judgment the Tribunal erred in declining to decide the question whether any portion of the sale price came within the scope of section 10(2)(vii). That question should have been examined at the very outset for the purpose of considering whether the assessee had placed before the Income-tax Officer truly and fully all materials facts necessary for the purpose of its assessment. If it is found that any portion of that sale price are profits then in our opinion the High Court was right in holding that the assessee had failed to place before the Income-tax Officer during the original assessment truly and fully all material facts necessary for the purpose of assessment. Admittedly, the price realised at the sale in excess of the written down value of the assets sold, had not been included as profits in the return submitted by the assessee. It had also not shown the same in Section D of Part I of the return. It may also be noted that the assessee had not shown either in its return or in any of the documents submitted to the Income-tax Off....

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.... was not justified in drawing the inference that the Income-tax Officer had considered all the relevant facts. In support of his contention that the disclosure made by the assessee was true and full in all material particulars and hence no proceedings could have been taken under section 34(1)(a), Mr. A. K. Sen, learned counsel for the assessee, relied on the decision of this court in V. D. M. Rm. M. Rm. Muthiah Chettiar v. Commissioner of Income-tax. In that case the question that arose for decision was whether the assessee's failure to include in his return the income of his wife and his minor sons admitted to the partnership of which he was a partner assessable in his hands under section 16(3)(a)(ii) can be considered as a failure to disclose truly and fully all facts material for the assessment. This court came to the conclusion that the omission in question did not come within the scope of section 34(1)(a). Therein this court observed that in the form of return prescribed under rule 19, of the Indian Income-tax Rules, 1922, framed under section 59 of the Act, there was no clause which required disclosure of the income of any person other than the income of the assessee, whic....