LexUNION OF INDIA AND OTHERS versus RAI SINGH DEB SINGH BIST & ANR.
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102
UNION OF INDIA AND OTIIERS
v.
WS. RAl SINGH DEB SINGH BIST & ANR.
December 15, 1972
,
[K. s. HEGDB AND P. JAGANMOHAN REDDY, JJ.]
Indian Iru:onu Tax Act, 1922~. 34(1) (a)-To confer jurisdiction
to ilsue notice, l conditions hav~ to be &alis{ied (i) I.T.O. must luzve
rtason to believe that tncome had been underauessed : (ii) He must /JQVe
reason to believe that either asseuee has fdlled to make a return under
s. 22 or he has omitted to disclose fully all material facts.
The assessee in these appeals is an Hindu Undivided Family. The
assessmer;Dt years in question ar~ ranged from 1942-43 to 1953-54. Tho
assessee tiled its returns for these years in time. The assessee's account
books showed considerable cash credits in the name of some relations
of the second respondent, the Karta of the H. U.F. The I. T. 0. went
into the ~uilneness of these cash credit entries. The contention of the
assessee was substantially accepted either by
the Appellate Assistant
Commissioner or by the Revenue Appellate Tribunal. With regard to
the assessment for the assessment years 1943-44 to 1949-50, the final
assessment was made in pursuance of an agreement or settlement arrived
between the assessee a;nd the Deputy Director of Inspection (Investiga·
tion). Long after the assessments in question were finalised, the I. T. 0.
issued notices to the appellants under s. 34 ( 1 )(a) of the Indian Income
Tax Act 1922, seeking to reopen the assessments already finalised.
The
assessee challenged the validity of thes,e notices of the I . T. 0.
The
High Court allowed the writ petitions
and
quashed the
impugned
notices.
The assessee alleged that there was no relevant material before tho
I. T. 0. before he issued the notices under s. 31 (a) on the basis o~
which he could have reason to believe that any income had escaped
assessment.
In the writ petitions, the assessee called upon the I. T. 0.
to produce the report made by him to the Central Board of Rev®Ue,
as. well as the ~der of the ~ntral Bo~rd of Revenue thereon. Despite
this prayer, neither the Umon of India, nor the
I. T. 0,
produced
the report made by the I . T . 0 . to the Central Board of Revenue under
s. 34(1) (a) nor the order of the Central Board of Revenue.
Dismissing the appeal,
HELD: (i) Before an_l.T.O. ca,r. issue a statuto'ry notice under
B
c
D
.,
s. 34(1)(a), he must have 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 for the years in question,
G
income, profits or gains chargeable to Income Tax have escaped assess-
ment during those years.
Further, before doing so, he
must
have
recorded his reaSO!DS for acting under s. 34(1)(a) and the Central Board·
of Revenue must have been satisfied on those reasons that it is a fit
case for the issue of the notice. The recording of the reasons in support
of the belief formed by the I. T, 0. and the sa t1sfaction of the Central
Board of Revenue on the basis of the reasons rerorded by the I, T. 0.
H
that it is a fit case for issue of notice under s. 34(1)(a) are extremely
important circumst-.mces to find out whether the I. T . 0. bas jurisdiction
to proceed under s.34(1)(a), [1040)
A
B
c
D
E
F
G
H
UNION v. 1W SINGH (H1gd1, /.)
103
Calcutta D/8counl Co. Ltd, v. I.T.O. Company District 1 Calcutta
and Others. 41 I.T.R 191; ChhutlfJI7I(ll Rajpal v. S. P. Chalia &: On. 79
I.T.R, 603; Sheo~th Singh v. Appellate A.aristant Commissioner of Income
Tax, Central, Calcutta&: Ors., 82 I.T.R. 1447 referred to.
(ii) In the pr~CSent case, an affidavit was filed before the Court stating
that the relevant records could not be traced from the file of the Ceptral
Board of Revenue. Assuming th-at the concerneci records were mis'sing
from the tile of the Central Board of Revenue, the copy of the report
made by the I. T. 0. and the Order received by him, must have been
in the file of the I. T. 0. and reason was given for not produci!Dg those
records. These circumstances give rise to an adverse inference that the
records in question were not produced because they did not assist the
department's case. Under the circumstanct:s, it is lllOt possible to come
to the conclusion that the facts necessary to confer jurisdiction on the
I.T.O. to proceed under s. 34(1)(a) had been established. There is
nothing to show on record that there was any relevant material before
the I.TExcerpt shown. Read the full judgment & AI analysis in Lexace.