TaxTMI 
TaxTMI 
1968 (2) TMI 3
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....Tankwalla) had mortgaged them with the ABC Bank Ltd. but that bank went into liquidation and the plots were acquired by the assessee from the liquidator of the bank. This was on the 6th September, 1949, during the accounting year 1st April, 1949, to 31st March, 1950, the assessment year being 1950-51. In his return for that year, the assessee did not show any income from property and when questioned before the Income-tax Officer, the assessee had stated that the Government was considering the question of payment of compensation in respect of these properties which had been requisitioned and, therefore, the assessee " could not be sure of the amount that he would receive as rent for the properties ". The assessee did not deny that he was the owner of the property. The Income-tax Officer thereupon estimated the income from the properties requisitioned by the Government at Rs. 1,600 for that year and included it in the assessment for the year 1950-51. Similar estimates were made by the Income-tax Officer for the subsequent years 1951-52 to 1957-58. These assessments of property income were made under section 9 for the assessment years 1950-51 to 1955-56 both inclusive, but for the yea....
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.... issued because the requirements of clause (a) of section 34(1) have not been fulfilled. He, however, does not dispute that the notices could be issued under section 34(1)(b), that is to say, for the assessment years 1955-56 to 1958-59. If notices could not be issued under section 34(1)(a), then obviously the assessments for the earlier years which are the years in dispute before us would be barred by time. Thus the question resolves itself into a question whether the grounds under section 34(1)(a) have been made out in the order to enable the department to assess the assessee under section 34(1)(a). Now the main order of the Income-tax Officer was passed in the assessment year 1950-51 and the view which the Income-tax Officer took is clear from paragraph 3 of that order. In response to the notices under section 34(1)(a), the assessee had filed a return showing the same income as was originally assessed by the Income-tax Officer, that is to say, Rs. 1,000 per year and on his behalf it was further argued that section 34(1)(a) could not apply. It was also urged that the income having been assessed under section 9 by the Income-tax Officer in the earlier assessments, the Income-tax....
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....ccupied by the police department. It was also stated that the matter of the rent was pending before the Government who were considering the question of payment of a lump sum by way of compensation.. . It is clear that the appellant had not furnished all the material facts to the Income-tax Officer. If the question of the rent was pending before the Government at the time the assessments were made, there must have been some correspondence between the appellant and the Government which would have indicated the rent which could have been reasonably expected by the appellant. The nature and dimensions of the hutments, the rent, if any, which had been previously realised from the hutments before the appellant purchased them and similar facts which would have helped the Income-tax Officer to frame a reasonable estimate, had apparently not been furnished. In fact, I find that the Income-tax Officer had not even been furnished the material from which he could properly have come to the conclusion whether the income from the property was assessable under section 9 or under section 12." We have deliberately quoted this order of the Appellate Assistant Commissioner in extenso, because upon ....
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.... taken by him on estimate basis and agreed to by the assessee. It suggests the mere correction of an arithmetical error. It was never the case of the department that the order was being merely rectified or corrected nor was any other provision of the law invoked on their behalf and we find absolutely no warrant for such a remark in the order of the Tribunal. Apart from it, there appears to have been no consideration of what are the requirements of section 34(1)(a), which is precisely the point which the assessee was making in the appeal before them. The only authority, therefore, which considered this question was, as we have said, the Appellate Assistant Commissioner. The ground upon which action under section 34(1)(a) can be taken, is stated by the section in the following words : " 34. (1) If- (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee . . . to disclose fully and truly all material facts necessary for his assessment . . . " It is the contention on behalf of the assessee that the requirement that there should be a failure " to disclose fully and truly all material facts necessary by reason of t....
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..... As appears from paragraph 3 of the Income-tax Officer's order, this representative had stated that as the assessee was not receiving any rent from the hutments which were occupied by the police department, the assessee could not declare the income. Then there is the following remark of the Income-tax Officer which shows what was the enquiry which the Income-tax Officer made : " In this behalf Mr. Iyer was asked whether any attempts were made by the assessee to recover the rent from the police department and he stated that the entire matter was still pending before the Government who are considering the question of payment of a lump sum by way of compensation." This passage shows that the assessee had stated before the Income-tax Officer two things : (1) that he was not receiving any rent from the hutments, and (2) that as regards any attempt to recover rent the matter was still pending before the Government who were considering the question of payment of a lump sum by way of compensation. The pending proceedings which are referred to in the above passage were admittedly the proceedings which the Collector had taken for the fixation of the compensation payable to the assesse....
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....been reasonably expected by the appellant. This ground is purely imaginary, because upon the record as it stands, except the two letters to which we have already referred, there is no fact brought out that there was other correspondence. The second ground was that the assessee failed to give the nature and dimensions of the hutments, and the third ground was that, " the rent, if any, which had been previously realised from the hutments ", had not been stated. So far as the nature and dimensions of the hutments are concerned, it cannot possibly be said that these were material facts necessary to be stated for the assessment of the assessee in respect of his income, profits or gains chargeable to income-tax. The nature and dimensions of a property are merely one out of the several pieces of evidence upon which an estimate or inference could be made as to what would be the income from the property. They are not material facts necessary for the assessment, though they may be relevant facts. Here comes in the distinction which the Supreme Court drew between primary facts and other facts in the cases to which we have referred. As to the non-mention of the rent the language used by the Ap....
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....ings were under section 34(1)(a), yet somehow the Tribunal felt that all that the Income-tax Officer was doing was to substitute the true figure of the income in place of the figures taken by him in the original assessment on an estimate basis which figures were agreed to by the assessee. For this view, as we have already said, there is absolutely no warrant. As to the real question which arises between the assessee and the department it is clear that the Tribunal did not consider it at all. That the question was raised, there can be no doubt. It was expressly dealt with by the Appellate Assistant Commissioner whose reasoning we have not been able to accept. Before the Tribunal also the question was raised along with the other question whether the proceedings were within limitation. In order to consider the question of limitation the Tribunal of necessity had to decide whether the case fell under section 34(1)(a) or under section 34(1)(b) and in order to decide that question it had to consider whether the requirements of section 34(1)(a) had been fulfilled. The Tribunal themselves have indicated that the question was raised before them in the following passage in their judgment ....