COMMISSIONER OF INCOME TAX, CALCUTTA versus BURLOP DEALERS LTD.

Citation: [1971] 3 S.C.R. 410 · Decided: 21-01-1971 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

410 
COMMISSIONER OF INCOME TAX, CALCUTTA 
A 
v. 
BURJ.,OP DEALERS LTD. 
January 21, 1971 
[J. C. SHAH, C.l, K. S. HEGDE AND A. N. GROVER, JI.] 
B 
Income-tax Act, 1922, s. 34(1) (a)-Scope of-As,essee 
disclosing 
primary facts necessary· for assessment-Duty of Income-tax Officer to 
draw necessary inferences. 
For the assessment year 1949-50 the assessee submitted a profit and 
Joss account disclosing a certain amount as profit in a joint venture and 
claimed that half df this ptofit was paid to R under a partnership agree-
ment. The Income-tax Officer accepted the return and included only half 
of the profit in the joint venture in computing the assessee's total income. 
In the next assessment year the assessee filed a return accompanied by a 
profit 'and loss account and claimed that it had transferred half the profit 
to R as his share. 
But the Income-tax Officer on examination of the 
transactions brought• the entire amount of profit in the joint venture to 
c 
tax, holding that the partnership agreement was got up a devise to re-
D> 
duce the profits received from the joint venture. This order was confum-
cd by the Tribunal and the High Court. 
Meanwhile, the Income-tax 
Officer issued a notice under s. 34 of the Income-tax Act, 19'22 to reopen 
the assessment for the assessment year 1949-50 .itnd to assess the amount 
allowed in that assessment as paid 
to R. 
The Income-tax 
Officer re-
assessed the income under s. 34(1)(a) and added that amount to the 
income returned by the assessee in the assessment 
year 1949-50. The· 
Appellate Assistant Commissioner confirmed that order but the Tilbunal 
reve·rsed. 
The High Court, 
on re'ference, answered 
in favour of the 
assessee. 
Dismissing the appeal by the Revenue, 
HELD : Under s. 34( 1) (a), if the assessee 
has disclosed 
primary 
facts relevant to the assessment, he is under no obligation to instruct the 
Income-tax Officer about the inference which the Income-tax Officer may 
raise 'from these facts. The terms of the Explanation to S. 34(1) also do 
not impose a more onerous obligation. 
Mere productign. of the books of 
account or other evidence from which material facts could with due dili-· 
gence, have oeen discovered does not. necessarily amoullt to disclosure 
within the meaning of s. 34(1);.but where on the evidence and_the mate-
rials produced the Inc~me-taii Officer could have 
reached a conclusion 
other than the one which he has reached, a proceeding under s. 34(1) (a) 
will not lie merely on the groufi'd that the Iacolhe-tax Officer has raised an 
infer~~ce ·'Which he may later regard as erroneous. 
The assessee had 'disclosed his books of account and evidence from 
which material facts could be discovered. 
It was 'for 
the Income-tax 
Officer to raise the necessary inference and if he did not do so the income 
which has escaped assessment cannot be brought to tax under s. 34(1)(a). 
[413 CJ 
. 
Calcutta Discount Co. Ltd. v. Income-tax Office•·, Companies District I, 
Calcutta & Anr. 41 I.T.R. 191, 200, referred to. 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 649 of 
1967. 
E 
G 
H 
-
ti
t 
A 
B 
C.I.T. v. BURLOP LTD. (Shah, G.J.) 
4U 
Appeal by special leave from the order dated May 4, 1966 o~ 
the Calcutta High Court in Income-tax Reference No. 
114 ot 
1965. 
Jagadish Swarup, Solicitor-Genera/, Ram Panjwani, R. N. 
Sachthey and B. D. Sharma, for the appellant. 
C. K. Daphtary, B. P. Maheshwari aind K. R. j(.haitan, for the 
respondent. 
The Judgment of the Court was delivered by 
Shah, C.J. Burlop Dealers Ltd.-hereinafter referred to as 
C 
'the assessee'-is a limited company. 
For the assessment year 
1949-50 the assessee submitted a profit and loss 
account dis-
closing in the relevant year of account Rs. 1,75,875/- as profit 
in a joint venture from H. 
M~nory Ltd. and claimed that 
Rs. 87,937/- being half the profit earned from H. Manory Ltd. was 
jJaid to Ratiram Tansukhrai under a partnership agreement. The 
D 
assessee stated that on Ju11e 5, 1948, it had e.ntered into 
a11 
agreement with H. Manory .Ltd. to do business in plywood chests 
aind in considerat.ion oi financing the business the assessee was 
to receive 50% df the profits of the 
business. 
The assessee 
claimed that it had entered into an agreement on October 7. 
1948, with Ratir"1fl Tansu.khrai for flnanding the transactions 
E of H. Manary Ltd. in the joint veinture, and had agreed to pay 
to Ratiram Tansukhrai 50% of the profit earned by it from the 
business wit

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