TaxTMI 
TaxTMI 
1971 (2) TMI 15
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.... all material times to carry on business in speculation in shares in joint-stock companies. The petitioner was also at all material times a director of Jindal (India) Private Ltd. during the assessment year with which we are concerned, i.e., 1961-62, which is the accounting year ending 31st March, 1961. The petitioner derived income from the aforesaid two several businesses as well as by way of director's remuneration of the said company and dividend in respect of shares, held by the petitioner in the said company. The petitioner filed his return of income for the said assessment year 1961-62 under the Indian Income-tax Act, 1922 (hereinafter referred to as the " old Act "). The petitioner duly appeared before the respondent No. 1 who is the assessing authority of his income under section 23(2) of the old Act, explained all queries connected with the return filed by the petitioner. At the time of the said assessment, the income of the firm of Jai Bharat Industries of Hissar was not assessed. The respondent No. 1 assessed the total income of the petitioner for the said assessment year 1961-62 under section 23(3) of the old Act subject to any rectification that might be necessary un....
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....er in the said firm was the petitioner. In support of the petition before me, Mr. Debi Pal urged the following points : (1) The Income-tax Officer, being the respondent No. 1, did not believe, in fact, that the income of the petitioner for the assessment year 1961-62 had escaped assessment. (2) The respondent No. 1 had, in fact, no material before him to induce himself to have this belief. (3) Assuming (but without admitting) that the respondent No. 1 had any material before him to hold such belief, such material, if any, could not lead to such belief in a reasonable man. (4) If it be contended that the finding of the said Income-tax Officer, " J " Ward, District III(2), Calcutta, in the aforesaid proceeding under section 26A of the old Act led to such belief on the part of the respondent No. 1, the said finding was not arrived at on any issue involved in the said proceeding and in fact and in law was a finding arrived at in excess of jurisdiction and was null and void. (5) The respondent No. 1 had not disclosed, the material which led to such belief in his mind in the affidavit filed by him in opposition to the instant petition and, therefore, the fulfilment of the condition....
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....f the said proceedings under section 26A of the old Act or the findings of the Income-tax Officer in the said proceeding led the respondent No. 1 to come to the belief necessary for the issue if the notice under section 148 of the new Act. From the records of the proceeding under section 148, Mr. Balai Pal wanted to rely on certain documents. After going through the said records, I gave leave to Mr. Balai Pal to file copies of the said documents, and give one copy of each of such documents to Mr. Debi Pal. One of such documents is a letter dated the 12th March, 1970, written by the respondent No. I to the Commissioner of Income-tax, West Bengal III, Calcutta, one of the other documents is the order sheet and the last one is the report in connection with the starting of proceedings under section 147 of the Income-tax Act, 1961. The aforesaid three documents seemed to me to be material for the purpose of the instant application. In the letter dated the 12th March, 1970, the respondent No. 1 wrote to the Commissioner as follows : " Re : Proposal under section 147(a) for the assessment year 1961-62 (1) Sitaram Jindal of 161 /1, M.G.Rd., Cal. & (2) Shri Om Prakash Jindal of 161/1, M.....
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....that for this failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income chargeable to tax for the year has escaped assessment to the extent of Rs. 14,304 during the year; hence this proposal. Tax effect will be Rs. 4,890." From the said letter dated the 12th March, 1970, it appears that the Income-tax Officer, " J " Ward, District III(2), Calcutta, informed respondent No. 1 that he had held that a partner, amongst others, Smt. Jamuna Devi Jindal, wife of the petitioner, was a benamidar-for her husband in the firm of Messrs. Om Prakash & Co., for the assessment year 1961-62. The said Income-tax Officer, " J " Ward, District III(2), wanted the respondent No. 1 to club the share income of, amongst others, Jamuna Devi Jindal, in the hands of her husband the petitioner, and so respondent No. 1 stated : " Hence, I am submitting the proposals for your kind approval. " The order dated the 12th March, 1970, as appearing in the order sheet shows that respondent No. 1 ordered the proposal under section 147(a) for sanction to be sent to the Commissioner, as Jamuna Devi Jindal, a partner in M/s. Om Prakash & Co., had be....
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....for the accounting years relating to the aforesaid three assessment years, namely, 1942-43, 194344 and 1944-45. The assessee filed returns in compliance with the notices but on 18th September, 1951, moved the High Court of Calcutta for the issue of appropriate writs or orders under article 226 of the Constitution commanding the Income-tax Officer not to proceed to assess the a in pursuance of the said notices. Two grounds were taken in support of the said application: " (i) The pretended notices were issued without the existence of the conditions precedent necessary for conferring jurisdiction to issue such notices under section 34 to the assessment for the years 1942-43, 1943-44 and 1944-45 which became barred before March, 1951 and (ii) the amendment of section 34 of the Income-tax Act, 1922, in 1948 was not retrospective." Order was in favour of the assessee by the first court. In appeal the appellate court allowed the appeal and, the assessee's application under article 226 was dismissed with costs. In appeal, the Supreme Court observed as follows : " To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but wi....
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.... finding by taking into consideration the primary facts and making and drawing inferences of fact as well as of law on the basis of such primary facts. In the aforesaid case it was held on the facts of the said case that the assessee disclosed all primary facts including the particulars of his sales of shares before the assessing authority. It was for the assessing authority to draw his inferences from the said facts. Only because an assessing authority changed his opinion as to the subject-matter or the nature of the transactions did not entitle the assessing authority to issue a notice under section 34 of the old Act if there was no failure or omission on the part of the assessee to disclose all primary facts fully and truly. It seems that where the Income-tax Officer founds his belief on the misapprehension of the true effect of facts in his possession, such belief would not be in consequence of any information. That is not an information but merely a change of opinion. An Income-tax Officer cannot institute a fishing enquiry or embark upon a roving investigation on coming into possession of certain facts which only give rise to suspicion (see R. B. Bansilal Abirchand Firm v. Co....
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....been satisfied. The finding or the opinion of the Income-tax Officer, ' J ' Ward, District III(2), as mentioned above, might not have been a finding on an issue or matter germane to the issue involved in the said proceedings under section 26A of the old Act and might have been arrived at without jurisdiction but, nevertheless, the said finding would, in my opinion, be an information. That information would be evidence in any event to induce the belief that there was omission to disclose the said fact of benami character of the ownership of the share in the partnership firm by the wife for the assessee and consequential escapement of income of the assessee out of the said firm from assessment. The information might have been acquired subsequent to the assessment made. That, however, does not make the assessee acquire the interest in the firm subsequent to the assessment because the benami character of the share of the wife in the said firm had been in existence from the very inception of the said partnership and in any event at a time prior to the assessment. That merely was discovered subsequent to the assessment. This would have been sufficient to find jurisdiction in respondent....
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....est on the basis of such tentative opinion to proceed against the assessee was made by the Income-tax Officer, 'J' Ward, District III(2) on or prior to 12th of March, 1970. It is clear from the facts recited hereinabove that respondent No. 1 did not himself consider or apply his mind to any fact in order to come to any belief with regard to the omission or failure of the petitioner to disclose any primary fact relevant for the purpose of assessment of his income for the assessment year 1961-62. Thus respondent No. 1 could not have any belief that as a consequence of such failure or omission the income for that year of the petitioner had escaped assessment. Thus the conditions precedent to the issue of the impugned notice under section 148 in the instant case were not satisfied. The impugned notice in the instant case, therefore, in my opinion, must be struck down. In view of the conclusion arrived at by me on the basis of the facts in the instant case, it is not necessary for me to deal with the other cases cited at the Bar. The said eases, as I have stated earlier, are mere applications of the principles on the question involved before me as stated by the Supreme Court in the afo....