TaxTMI 
TaxTMI 
1973 (2) TMI 49
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....e certain expenses which are incurred in the United Kingdom and the United States offices of the bank which can be said to be referable to transactions which originated in India. In the course of the assessment for the assessment year 1950-51, for the first time the petitioner claimed a deduction of a proportion of the expenses of its head office, London office and the U.S.A. offices, respectively, referable to the Indian offices. It appears from paragraph 5 of the petition that upon such claim being made, one K. N. Banerjee, the then Income-tax Officer, had various discussions with the petitioner's representatives both verbally as well as in writing. The Income-tax Officer called for and the petitioner submitted various details in support of the petitioner's claim including the break-ups of the relative expenses, the Indian Offices' profit and loss account and balance-sheet as well as the world profit and loss account and balance-sheet and all other documents and information asked for. The relevant correspondence starts with a letter dated the 22nd January, 1951, written by the Income-tax Officer to the manager of the petitioner raising this specific question and ending with the l....
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....o discussion on the question of the deduction in respect of the Indian proportion of head office expenses. This must be because the basis on which the deduction was allowed by the Income-tax Officer in the previous year on the assessee's own computation was allowed in this particular year by the Income-tax Officer. Similarly, for the assessment year 1953-54 there is no discussion on this aspect presumably because the deduction was allowed on the same basis. It appears that in connection with the assessment for the assessment year 1954-55 the matter was again raked up by the then Income-tax Officer. This is clear from the fact that on the 27th November, 1958, the manager of the petitioner-company addressed a letter to the Income-tax Officer which is in the following terms : " Dear Sir, Income-tax Assessment Year 1954-55. Our Accounting year 1953. As requested by you at the hearing on 4th November, we attach notes on the items regarding which you required clarification. We trust these notes will explain the position to your satisfaction. " The note referred to in the letter is to be found at page 87 of the brief and is in the following terms : " Re : Deduction....
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....come in those countries. This fact first came to my knowledge on receipt of the letter of the petitioner dated 3rd April, 1965. " It is to be noted that this officer, Dobe, was neither the officer who passed the original order of assessment nor the officer who issued the impugned notices. Having regard to this fact and having regard to several decisions of this court including some of my decisions where it has been held that these affidavits are really useless, leave was asked for to file a further affidavit and such leave was granted by me subsequently. Another affidavit has been affirmed by Sailesh Kumar Chakravarty, the Income-tax Officer, " C " Ward, Comp. Dist. III, on the 28th May, 1970. Before I deal with this affidavit I must record, as pointed out by Dr. Debi Pal appearing on behalf of the assessee, that there is a statement in paragraph 4 to the following effect : " I passed the assessment order in the aforesaid assessment years 1957-58 to 1960-6l. " Turning to the records, however, it appears that this statement is an absolutely false statement. Mr. Suhas Sen, appearing on behalf of the revenue, tendered an apology on behalf of the deponent for this obviously un....
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....d a sum of Rs. 30,57,608 to the profit and loss account in India. But for the purpose of computation of income the account has been debited on the plea that the credit represents subsidy from head office. I have reason to believe that the credit to the profit and loss account in India is clearly profit received in India which has also escaped assessment. (Sd.) A. V. Kasbekar, I.T.O., C-Ward, C-III/Cal. " Dr. Pal for the petitioner strongly relies on the first paragraph of the recorded reasons where it is stated that for the assessment year 1950-51, the assessee represented that, in addition to the supervision charges incurred by the head office in Hongkong, the London and New York branches of the bank also incurred supervision charges on behalf of Indian branches and got such claim accepted by the department. This is an admission according to Dr. Pal, on behalf of the revenue authorities that not only was the fact that the assessee was contending that certain supervision charges were being incurred by the London and New York branches of the bank in connection with Indian work was within the knowledge of the Income-tax Officer in the respective years of assessments but also....
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....rimary facts were admittedly within the knowledge of the Income-tax Officer at the time when he completed the first reassessment under section 34. " Dr. Pal submits that the facts of the case before the Supreme Court are on all fours with the facts of the present case. He stated that it is impossible for the assessee to find out as to what facts, apart from the primary fact, the assessing authority would consider to be relevant. It is for the assessing authority to make intelligent enquiries and find out what it considers relevant fact. If the Income-tax Officer in the course of his original assessment proceedings considered the question whether the claim for deduction which was being made in the Indian assessment was also being made in connection with the assessment in other countries was a relevant fact, surely the Income-tax Officer could have made the necessary enquiries from the assessee to ascertain the position. It was pointed out that elaborate enquiries were made by the Income-tax Officer, Banerjee, in connection with the assessment for the assessment year 1950-51. While several aspects of this question were examined, this point never came up and no query was addressed ....
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....jarat cases, which I have referred to hereinabove, clearly cast the duty on the Income-tax Officer to exercise due care and caution and to make intelligent enquires. The cases lay down that a failure to make such an enquiry or making a perfunctory enquiry at the time of the original assessment does not justify proceedings for reassessment. Further, a mere change of opinion of a successor officer is no ground for action under section 34(1)(a) of the old Act which corresponds to sections 147(1)(a) and 148 of the Act. " In the case mentioned above, I took the view that if the Income-tax Officer has come to know of a fact even in connection with the assessment proceedings of another company who was not the assessee in that case, the assessee was not under any obligation to disclose that fact to the officer which he already knew. Dr. Pal submitted that the present case stood on a much stronger footing because the officer had come to know all the primary facts in connection with the assessment of the assessee itself. It was further pointed out that the Gujarat case which I have mentioned in my judgment has been since affirmed by the Supreme Court in the case which I have noticed a lit....
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....tence at page 472 of the report : " It is true that the Income-tax Officer could have made further enquiry into the matter but the fact that he did not make any further enquiry does not take the case out of section 34(1)(a) particularly when the assessee had failed to place truly and fully all the material facts before him. " With great respect I do not think that Hegde J. in the above observation intended to lay down an absolute proposition that even when there was no omission or failure on the part of the assessee, a mere failure on the part of the Income-tax Officer to make further enquiries would justify reopening under section 34(1)(a) of the old Act. In other words, the observation as to the failure of the Income-tax Officer in the above sentence of the judgment of Hegde J. is to be understood in the context of the fact that, according to the Supreme Court, there was an omission or failure on the part of the assessee to disclose primary facts in the facts of that case. Consequently, this observation is of no assistance to the revenue in the present case. Mr. Sen also relied on a decision of the Madras High Court in the case of K. P. Arthanariswamy Chettiar v. First I....