1965 (4) TMI 23

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....year 1953-54 had "(a) escaped assessment, (b) been under-assessed", he proposed to reassess the said income that had "(a) escaped assessment, (b) been under-assessed" and directed the company to deliver a return of the total income of the company assessable for the said assessment year 1953-54. The company by letter dated January 30,1961, called upon the Income-tax Officer to disclose whether the notice was issued under clause (a) or clause (b) of sub-section (1) of section 34. It was asserted in the letter that all facts necessary for the purpose of assessment had been fully and truly disclosed in the original assessment, and the notice was misconceived. In reply to this letter the Income-tax Officer on February 16, 1961, informed the company that the notice was issued under section 34(1)(a). The Income-tax Officer also issued "a questionnaire" demanding information about the commission paid together with copies of the agreement with Alloys and correspondence relating to sales through Alloys. On December 21, 1961, the Income-tax Officer informed the company that since the questions were not replied to, he presumed that no correspondence with Alloys existed and that the payment of ....

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....cluded in the income, profits or gains had been credited or transferred to any assets, capital account, or any other liability account, a similar certificate regarding any credit for important expenses claimed under the head "Profit and Loss A/c", a list of buyers with full addresses along with quantity, number and net proceeds of export business as well as Indian sales, a statement setting out full details of various items of indirect expenses debited to profit and loss account and a statement of expenses grouped and sorted out under the heads, "wages", "salary" and other emoluments. On June 21, 1954, the company filed the certificates and statements demanded together with a statement showing that out of the sale proceeds, commission paid to Alloys and J. S. Williams was deducted. In the course of assessment proceedings, R. S. Agarwal, a representative of the company, appeared before the Income-tax Officer and agreed that the commission "debited as paid to Williams may be added back", and about Alloys he said that the commission "had already been paid". Thereafter, on February 14, 1955, assessment of the company was completed by the Income-tax Officer. Relying upon this course....

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....all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains . . . and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section." This court in Calcutta Discount Co. v. Income-tax Officer, Companies District I observed that the Income-tax Officer has power to issue a notice under section 34(1)(a) only if he has reason to believe (1) that income, profits or gains had been under-assessed and (2) that such under-assessment was due to non-disclosure of material facts by the assessee, and that where facts which invest the Income-tax Officer with jurisdiction to issue the notice do not exist, the assessee may apply to the High Court under article 226 of the Constitution for appropriate relief. The company has asserted that the facts which attract the jurisdiction of the Income-tax Officer to issue a notice under section 34 did not exist, and the impugned notice was issued in colourable exercise of power. jurisdiction to issue prerogative writs is designed to invest the High Court with authority to superinte....

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....the Income-tax Officer. Again the plea that the impugned notice was issued with a collateral object could not be rejected without an enquiry. Jurisdiction of the Income-tax Officer obviously arises when he has reason to believe that by reason of omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment, income of the assessee has escaped assessment, or has been underassessed, and when the party claiming relief challenges on oath the existence of the conditions, which confer jurisdiction, and sets out facts which may, unless disproved, support his case, an order dismissing his petition in limine may not properly be made. We may hasten to observe that we are not seeking to lay down any rigid rule about the nature or quantum of enquiry which the High Court in a petition which seeks to challenge the issue of a notice under section 34(1)(a) of the Indian Income-tax Act may make. If the petition on the face of it does not disclose a right to relief, the High Court has undoubtedly power to dismiss it in limine. If there be other grounds which appear to the High Court to be adequate such as delay or acquiescence, existenc....