LexINCOME TAX OFFICER, AZAMGARH & ANR. versus MEWALAL DWARKA PRASAD & VICE VERSA
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INCOME TAX OFFICER, AZAMGARH & ANR.
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v.
MEW ALAL DW ARKA PRASAD & VICE VERSA
FEBRUARY 10, 1989
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[R.S. PATHAK, CJ AND RAN<;JANATH MISRA, J.)
Income Tax Act, 1961: Sections 142, 143, 147 and 148-l. T.O.
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issuing notice in respect of three entries on the ground of escapement of ·-{ "-
income-Validity of the notice-Jurisdiction of High Court to
examine-Limits thereof.
In respect of assessment year 1965·66, the Income-tax Officer
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issued notices to the assessee under s. 148 read with ss. 142(1) and 143(2)
of the Act on the ground that income has escaped assessment in respect
of three cash credit entries totalling Rs. l lakh. The assessee challenged
D the notices by way of writ petitions before the High Court. The High
Court gave a finding that the notice was within jurisdiction only in
respect of an entry of Rs.30,000 and in respect of the other two entries
viz. Rs.40,000 and Rs.30,000 it directed the Income-tax Officer not to
reopen the assessment.
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These two appeals are against the High Court's judgment. The
· appeal by Revenue, by certificate, is in respect of the two entries of
Rs.40,000 and Rs.30,000 and the other appeal of the assessee, by special
leave, is in respect of the entry of Rs.30,000.
On behalf of the Revenue, it was contended that once the High
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Court sustained the notice in respect of a sum of Rs.30,000, that gave
.full jurisdiction to the Income-tax Officer to reopen the assessment and
that the High Court should not have examined the tenability of the
assessee's contention in regard to the two transactions of Rs.30,000 and
Rs.40,000 and that aspect should have been left to be considered by the
Income-tax Officer while making the reassessment.
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The contention of the assessee was that the notice was issued more
than 7 years after the assessment was completed and was also beyond
the period of limitation, viz., four years, that the escapement of the
income from assessment had not resulted from failure on the part of the
assessee to disclose fully and truly all material facts necessary for the
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assessment.
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INCOME TAX OFFICER v. M.D. PRASAD
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Allowing the appeal of the assessee, and dismissing the appeal by
the Revenue.
HELD: 1. The notice issued under s. 148 of the Act is quashed. It
was not for the High Court to examine the validity of the notice under
s. 1~8 in regard to the two items if the High Court came to the conclu-
sion that the notice was valid at least in respec~ of the remaining item.
Whether the Income-tax Officer while making the reassessment would
take into account the other two items, should have been left to be
considered by the Income-tax Officer in the fresh assess111ent proceed-
ing. l6lOC-D]
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CIT. Punjab, H.P. & Bilaspur, Simla v. Jagan Nath Maheshwary,
J2 AIR ~18 and PulavarthiYiswanadham v. CIT. A.P., SO ITR 463
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approved.
V. laf{an Mohan Rao & Ors. v. CIT & Excess Profits Tax,
A.P .. 75 ITR 373 and Parimisetti Seetharamamma v. CIT, 11963] SO
ITR 450 referred to.
2. I The three amounts mentioned in the notice under s. 148 of the
Act were found in the assessee's account by the Income-tax Officer
when he examined the same in course of the assessment proceedings. He
had called upon the assessee to substantiate the genuineness of the
transactions and the assessee had produced material to support the
same, The Income-tax Officer accepted the documents produced and
treated all the three transactions to be genuine and on that footing
completed the assessment. The primary facts were before the Income-
tax Officer at the time of the regular assessment and he called upon the
assessee to explain to his satisfaction that the entries were genuine and
on the basis of materials provided by the assessee, satisfaction was
reached. It was then open to the Income-Tax Officer to make further
probe before completing the assessment if he was of the view that the
mat~rial provided by the assessee was not sufficient for him to be
satisfied that the assessee's contention was correct. l6IOE-H)
2.2 The expression 'material facts' used ins. 147(a) referred only
to primary facts and the duty of the assessee was confined to disclosure
of primary facts and he had not to indicate what factual or legal infer-
ences should properly be drawn from primary facts and this clause did
apply to the facts of the present case as the alleged escapement of
income for assessment had not resulted from faExcerpt shown. Read the full judgment & AI analysis in Lexace.