TaxTMI 
TaxTMI 
2001 (12) TMI 25
X X X X Extracts X X X X
X X X X Extracts X X X X
....s"), at a public auction which was conducted by the certificate officer under the provisions of the Bengal Public Demands Recovery Act, 1913. The petitioner purchased the said premises subject to prior encumbrances for a total price of Rs.2,27,250. The auction under the Bengal Public Demands Recovery Act, 1913, was for recovery of sales tax. The petitioner took possession of the said premises and the same had been mutated in the name of the petitioner in the records of the Calcutta Corporation. On April 3, 1957, the Hongkong and Shanghai Banking Corporation, Calcutta, filed a suit against the original owner of the premises as well as the petitioner for recovery of a sum of Rs.35,34,063.11.6 on the ground that the premises had been mortgaged by the original owner to the bank. The interlocutory application filed by the bank in the said suit was disposed of by an order dated April 29, 1957. The said order in so far as it is material provides as follows (wherein the petitioner is referred to as the defendant firm and the bank as the plaintiff-bank): "It is ordered by and with the consent of the plaintiff-bank and the said defendant firm and without prejudice to the rights and conten....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pril 29, 1957, and would refund a sum of Rs.9,02,292.70 together with a further amount of Rs.4,40,000 on account of interest. This has been done by the bank. In the meantime a series of notices under section 148 of the Act were issued to the petitioner. These notices have been separately challenged in different proceedings as noted below: ------------------------------------------------------------------------------------ Year Notice Proceedings ------------------------------------------------------------------------------------ 1. 1970-71 30-3-1987 Matter No. 2429 of 1987; Rule nisi and interim o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; 5,60,721 Less: Paid to Hongkong and Shanghai Bank 2,10,000 Corporation in terms of High Court's order dated 28-5-1957 in Suit No. 689 of 1957 ------------ 3,50,721  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the petitioner's rights and contentions. The petitioner offered to settle the proceedings between the parties. Several letters were written. The last letter written ultimately on March 9, 1989, was to the following effect: "(a) We will have also no objection if the sum of Rs.9,02,292 received from Hongkong Bank during the previous year relevant to the assessment year 1988-89 is subjected to tax during the assessment year 1988-89. (b) In that case, however, the Department will have to cancel the assessments already made under section 147(a)/143(3) for the assessment year 1975-76 and 1976-77. (c) It will also drop further proceedings in reopening of the assessment years 1970-71 and 1971-72. (d) The Department will also have to agree not to reopen assessment under section 147 for any of the years. (e) The Department will not also charge interest under section 139(8)/215/217 of the Income-tax Act in respect of the assessment year 1988-89 and also will not start any penalty proceedings under section 273/271(1)(a) in respect of the said year." The reassessment is sought to be made under section 147(a) of the Act as it then stood. The instant writ petition has been fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the income of the assessee escaped due to non-disclosure of material fact by the writ petitioner at the time of the original assessment and the learned judge erred in law in holding that all material and primary facts were disclosed by the writ petitioner at the time of the original assessment. It has been further alleged by the appellants that the learned judge ought to have taken into consideration the fact that the writ petitioner failed to disclose material facts fully and truly by suppressing from the Income-tax Officer the relevant fact that the amount of Rs.17,500 per month was not payment of interest to the bank in terms of the order of the High Court dated April 29, 1957, and that the learned judge should have held that the writ petitioner suppressed the fact that the property was purchased by the writ petitioner subject to prior encumbrances and the sum of Rs.17,500 per month amounting to Rs.2,10,000 per year was paid towards discharge of encumbrances on the property purchased and as such the same is capital expenditure and not payment of interest of loan taken from the bank by the writ petitioner as incorrectly stated by the writ petitioner in the income-tax returns and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), or (d) where excessive loss or depreciation allowance has been computed. Explanation 2.--Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section." It was contended by the learned advocate for the appellants that at the time of initial assessment of the income from the premises in the petitioner's hands the respondent wrongly claimed deduction of payment of Rs.17,500 per month on account of interest and the same was allowed by the Income-tax Officer. It has been further contended on behalf of the appellants that the said payment was in fact towards payment of the mortgage debt and as such the respondent had failed to disclose the matter fully and truly to the Income-tax Officer as a result of which income had escaped assessment necessitating the assessment under section 147(a) of the Act. The learned advocate for the respondent/writ petitioner, on the other hand, contended that all the relevant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad stated during the assessment proceedings that the sale of shares during the relevant assessment years was a casual transaction in the nature of mere change of investment and the Income-tax Officer found later that those sales were really in the nature of trading transactions. The Revenue contended that the assessee ought to have stated that they were trading transactions and that his assertion that they were casual transactions in the nature of change of investment amounted to omission or failure to disclose fully and truly all material facts necessary for his assessment for that year within the meaning of section 34. Such contention of the Revenue was rejected by the Supreme Court holding that the true nature of transaction being a matter capable of different opinions, is not a material or primary fact but a matter of inference and hence it cannot be said that there was an omission or failure of the nature contemplated by section 34 on the part of the assessee. The above noted principles enunciated by the Supreme Court in the case of Calcutta Discount Co. Ltd. [1961] 41 ITR 191 were followed in a large number of subsequent decisions of the Supreme Court. It is well-settled t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng any fact. No question of misrepresentation arose in such case. It can in no way be assumed in a justifiable manner that the respondent/writ petitioner could have disclosed other facts at the material time which could have led the Income-tax Officer to the conclusion that the payment of Rs.17,500 per month was on account of capital expenditure. While dealing with this aspect of the matter, the learned judge rightly observed as follows: "Until the decree was passed in 1976 it was not possible for the parties to the litigation including the petitioner to state with certitude that the bank would at all be successful in the suit and therefore would be entitled to appropriate the amount paid by the petitioner. Secondly, it could not be predicted with any certainty for what amount the decree would be passed, whether interest ante item, pendente lite or upon judgment would be allowed on the principal claim of the bank and how the payments directed to be made by the petitioner to the bank as an interim measure would be directed to be adjusted. If that is so, the question of omission or failure on the part of the petitioner to disclose that the monthly payments for the assessment ye....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity cannot now take recourse to section 147(a) of the Act. The learned advocate for the appellants has cited the following rulings: (1) Sri Krishna Pvt. Ltd. v. ITO [1996] 221 ITR 538 (SC), 539, 546 to 549; (2) Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC); (3) Indo-Aden Salt Manufacturing and Trading Co. Pvt. Ltd. v. CIT [1986] 159 ITR 624 (SC); (4) Praful Chunilal Patel v. M.J. Makwana, Asst. CIT [1999] 236 ITR 832, 840 (Guj); and (5) M.M. Mahajan v. GTO [1992] 194 ITR 184 (P&H). But on a careful scrutiny we find that the aforesaid decisions cannot render any assistance to the appellants in the facts and circumstances of the present case. It is settled law that when the primary facts necessary for assessment are fully and truly disclosed to the Income-tax Officer at the stage of the original assessment proceedings, he is not entitled, on a change of opinion, to commence proceedings for reassessment. Reference can be made in this context to the case of CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC). The case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) relates to false statement made by the assessee concerned at the time of the original ass....