TaxTMI 
TaxTMI 
1952 (3) TMI 52
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....he said assessments were duly paid by the petitioner company. By three notices dated the 28th March, 1951, issued under Section 34 of the Income-tax Act as amended by Act XLV1II of 1948, the Income-tax Officer, Companies District I, Calcutta, called upon ' the petitioner to submit returns of the petitioner's total income and total world income in respect of the said three previous years of assessment 1942-43, 1943-44 and 1944-45. On the 13th August, 1951, the petitioner filed the returns under protest. The petitioner challenges the jurisdiction of the Income-tax Officer to proceed with the re-assessments on the ground that the necessary conditions precedent which must exist before the Income-tax Officer can assume jurisdiction to proceed under Section 34 of the Income-tax Act are absent in the present case and secondly on the ground that Section 34 as amended in 1948 has no application to the assessments for 1942-43, 1943-44 and 1944-45 as the amendment has no retrospective operation. Section 34 of the Indian Income-tax Act, 1922, as amended by Act XLVIII of 1948 is as follows :- "34. (1) If- (a) the Income-tax Officer has reason to believe that by reason of the omi....
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....t books or other evidence from which material facts could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. (2) Where an assessment is reopened in circumstances falling under clause (b) of sub-section (1), the assessee may, if he has not impugned any part of the original assessment order for that year either under Section 30 or under Section 33A, claim that the proceedings under sub-section (1) of this section shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the items alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made : - Provided that in so doing he shall not be entitled to reopen matters concluded by an order under Section 33B or Section 35, or by a decision of the High Court or of the Privy Council under Section 66 and Section 66A. (3) No order of assessment under Section 23 to which clause (c ) of sub-section (1) of Section 28 applies or of assessment or re-assessment in cases falling within clause (a) of sub-section (1)....
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.... to the conclusion from the examination he makes and from any information he may choose to receive. There is nothing to prevent him from getting such information as he can." Avory, J., at page 897 observed: " In my opinion the word means ' has reason to believe'". Lush, J., construed the word to mean "finds or satisfies himself " (page 898). It is therefore clear that although the wordings of Section 34 have undergone changes under the Amending Acts of 1939 and 1948 it is the personal satisfaction of the Income-tax Officer as to the existence of the conditions precedent to the operation of the section that is necessary for giving the Income-tax Officer the further jurisdiction to re-assess under the terms of that section. But although it is the belief of the Income-tax Officer which gives him jurisdiction to proceed under Section 34 it is clear that there must be information or material before the Income-tax Officer which would enable him, acting honestly, to come to the conclusion that the conditions precedent to the exercise of jurisdiction under Section 34 in fact exist. If there is some prima facie ground for the belief or opinion of the Income-tax Officer, the Court i....
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....e company's version that the sales of shares were casual transactions and were in the nature of mere change of investments. Now the results of the company's trading from year to year show that the company has really been systematically carrying out a trade in the sale of investments. As such the company had failed to disclose the true intention behind the sale of the shares and as such Section 34 (1) (a) may be attracted." Thus it is clear that the deponent had materials before him to show that the company's trading from year to year disclosed that the company had been systematically carrying on a trade in the sale of investments. Whether the materials were sufficient or not or whether the belief or opinion is erroneous or not cannot, as I have pointed out before, be enquired into by this Court. The Legislature has given the Income-tax Officer jurisdiction to determine all facts including the existence of the preliminary facts on which the further exercise of his jurisdiction depends and so the contention that the Income-tax Officer cannot by wrongly deciding or assuming that certain preliminary facts exist confer on himself jurisdiction has no force and cannot be acce....
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....on 34 although described as a machinery section does not, in my-view, relate to procedure pure and simple but it affects also the substantive right or protection given to the assessee not to be subjected to re-assessment except only 'under certain conditions and within a certain time. The Amending Act of 1948 has introduced a new ground, viz., "failure to file the return" in Section 34 for invoking the jurisdiction of re-assessment under that section. Further the amendment has 1 provided an additional year for the Income-tax Officer within which he can complete the assessment or re-assessment provided notice under Section 34 (1) has been issued before the expiry of the eight years or four years, as the case may be. The amendment has also made certain alterations in the wordings of the section as it was after the amendment of 1939, and has extended the scope of Section 34. Thus this amendment not only introduces new grounds for subjecting the assessee to re-assessment under Section 34 but also extends the period within which the assessment under Section 34 can be completed. As the amendment therefore affects vested or substantive rights it cannot have retrospective operation unl....