S. NARAYANAPPA & ORS. versus COMMISSIONER OF INCOME-TAX, BANGALORE

Citation: [1967] 1 S.C.R. 590 · Decided: 27-09-1966 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

S. NARAYANAPPA & ORS. 
I' 
COMMISSIO'.'\ER OF INCOME-TAX, BANGALORf. 
September 27, 1966 
[J. C. SHAH, V. RAMASWAMI AND V. 
BHAKGAVA. JJ.j 
8 
illcome-uu: Ac1 (II of 1922), s. 34--Scope of. 
For the assessmenv year 1951-52, the appellant did not file a return 
of his income under s. 22 of the Income-tax Act, 1922, but the Income-
ta.x Officer assessed the income at a certain figure. 
When examining the 
material for the ossessment year 1955-56, it was discovered 
that the 
assessee made large investments and suppressed items of house property 
acquired by him. 
The Income-tax Officer, 
therefore, 
issued a notice 
under s. 34 ( 1 ) and after examining the return assessed the income for 
the asseS<ment year 1951-52 at a much higher figure.. In the "'fcrence 
to the High Coun, the appellant questioned the jurisdiction of the Officer 
to initiate proccedin1.'< under s. 34(1), but the High Coun held against 
him. 
Jn appeal to this Court, 
HELD: (i) 111e lr1come-tax Officer 
had reasonable 
grounds 
for 
thinking that there was non-disclosure of material facts on the pan of the 
appellant and ·that there was under-assessment 
for the assessment year 
1951-52, caused by the assessee's failure to submit his return. 
[593 CJ 
T\i.·o conditions must he sati:died in order 10 confer jurisdiction on the 
Income-tax· Officer to issue notice under s. 34, namely, (i) the Officer 
must have reason to believe that the income, profits or gains chargeable 
to income-tax had been unde·r-assesscd; (-ii) he must 
have 
reason to 
bclie\.'e that such under-assessment had occurred by reason of the omission 
or failure on Che part of the o..ssessee to make a return or disclose fulll 
all material facts necessary for assessment. 
The existence of the belie , 
and whelher the reasons for the belief ha\.'C a rational connection with or 
relevant bearing on, the forma1ion of the belief, arc open to examination 
by the court. 
But if there are in fact some reasonable grounds for the 
Officer to believe that thCrc had been a non-discl~ure as regards any fact, 
\Yhich could ha,ve a material bearing on the question of under-assessment, 
that \\'ould be sufficient to give him judsdiction to issue the notice under 
s. 34. and their sufficiency cannot be challenged by the a.<Sc.S•ee. [592 C-H] 
(ii) The scheme of s. 34 is that if the conditions of the main section 
arc sittisfied a notice has to be issued to the assessee. 
But before issuing 
the notice the pro\'iso requires thitt the officer should record his reasons 
af\d obtain the sanction of the Commissioner for initiating action under 
the section. 
But there is no requircmenr in the 
Act that the reasons 
which induced the Commissioner to accnrd _;;ancticn should also be com~ 
muaic~:cd to the a!lscssee. [593 F-GJ 
Crvn. APPEi.LA IF. 
JURISDICTION : Ci\'il Appeal :>:o. 562 of 
1965. 
Appeal by special lca\'e from the judgment and order dated 
July 24, 1963 of the Mysore Hi~h Court in l.T.R.C. No. 3 of 
1963 
c 
D 
., 
8 
H 
NARAYANAPPA v. c.r.T. (Ramaswami, JJ· 
591 
A 
R. Gopa/akrishnan, for the appellants. 
B 
c 
D 
E 
F 
G 
H 
S. V. Gupte, Solicitor-General, N. D. Karkhanis and R. N. 
Sachthey, for the respondent. 
The Judgment of the Court was delivered by 
Ramaswa_mf J. The appellant was carrying on business in 
jewellery, copper-wire and money lendin~. · The books of accounts 
of the appellant were closed on the 30th of June every year. For 
the assessment year 1951-52 (for which the previous year ended on 
30th June, 1950) the appellant did not comply with the notice issued 
under s. 22(2) or section 22(4) of the Income-tax Act. No return 
was filed by the appellant. The assessment was completed by the 
Income-tax Officer on such material as was available on the 23rd. 
February, 1955 and the income was assessed at Rs. 36,068/-. Subse-
quently, while making assessment for the assessment year 1955-56~ 
the appellant was asked to furnish a wealth statement which was 
actually filed on the .30th June, 1954. From the wealth statement 
it was found that the appellant had made investments for Rs. 39,000/-
during the previous year which ended on the 30th June, 1950, 
though in respect of that previous year, the appellant's income was 
assessed only at Rs. 36,068/-. A scrutiny of the wealth statement and 
the Bank account and the extensive nature of the business.catried on 
by the appellant led the Income-tax Officer to entertain a belief that 
the income of the year 1951-52 had been under-assess

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