V.S. Desai, J.
1. This is a petition under article 226 of the Constitution of India challenging the notices issued to the petitioner under section 34(1)(a) of the Indian Income-tax Act, 1922, for reopening its assessments for the assessment years 1949-50 and 1950-51. The petitioner has prayed in the present petition for appropriate writs quashing the said notices and for restraining the respondent from taking any further steps or proceedings in enforcement, furtherance, pursuance or implementation of the said notices. The petitioner company was formed in the year 1933 in the former Phalton State as a private company, to establish a sugar factory in the State for the purpose of manufacture and sale of sugar. In the year 1942 it was converted into a public limited company incorporated in the Phalton State. At the commencement of the company in the year 1933 it had entered into an agreement with the Phalton Darbar. Under this agreement the company had obtained certain concessions in the matter of the levy of the State taxes, cesses and duties. We are concerned with the concessions which it had obtained as regards income-tax from the State. This concession was contained in clause 16 which provided that the company would be exempt in respect of its first sugar factory at Pimplachi Wadi from payment of income-tax from the commencement of the company until the expiry of the period of ten years computed from the date of the regular manufacturing of sugar in the said factory, and that after the expiry of the said period income-tax at a rate not exceeding one anna in a rupee on the net profits of the said sugar factory might be levied on the company. The company started manufacture of sugar from the month of February, 1934. It was exempted by the State from the payment of income-tax under the agreement till February, 1944, and thereafter the State was levying income-tax at the rate of one anna in a rupee. Prior to the merger of the Phalton State, which occurred on the 8th of March, 1948, the petitioner company used to be charged to income-tax by the Indian income-tax authorities in respect of its income which was chargeable to tax under the Indian Income-tax Act. Up to and inclusive of the assessment year 1947-48, the income of the company, which was made subject to tax under the Indian Income-tax Act, was interest income on deposits and Government securities on the basis that the said income had accrued or arisen in British India. No part of the income of the petitioner company's sugar factory in the Phalton State was included in the petitioner's assessment in British India during those years. After the merger of the Phalton State, by section 3 of the Taxation Laws (Extension to Merged Territories and Amendment) Act, 1949, the Indian Income-tax Act, 1922, was brought into force and made applicable to the merged State of Phalton with effect from the 1st April, 1949. Since the application of the Indian Income-tax Act to the merged State territories was likely to create several difficulties and anomalies and was also likely to cause hardships, the Taxation Laws (Extension to Merged Territories and Amendment) Act, 1949, introduced section 60A in the Indian Income-tax Act enabling the Central Government, if it considered it necessary or expedient so to do for avoiding any hardship or anomaly or removing any difficulty that may arise as a result of the extension of the Indian Income-tax Act to the merged territories by general or special order to make an exemption, reduction in rate or other modification in respect of income-tax in favour of any class of income, or in regard to the whole or any part of the income of any person or class of persons. In exercise of the powers conferred by the said section (60A), the Central Government passed the Merged States (Taxation Concessions) Order, 1949, (hereinafter referred to as the Concessions Order). Clause (15) of the said Order provided :
'Where any industrial undertaking situate in a merged State claims that it has been granted any exemption from or concession in respect of income-tax, super-tax or business profits tax by the ruler of the State before the 1st day of August, 1949, it shall submit an application to the Commissioner of Income-tax giving particulars as specified in the said clause.'
2. The Commissioner, after receipt of the application and after obtaining such further information as he might require, was to forward the said application to the Central Government and the Central Government was empowered, having regard to all the circumstances of the case, to grant such relief as it may think appropriate to the industrial undertaking. The petitioner made an application under clause (15) on the 24th of January, 1950, and on 8th of July, 1950, the Commissioner of Income-tax, Bombay South, informed the petitioner that the Government of India had decided, in pursuance of clause (15) of the Order, that the petitioner would be exempted from payment of income-tax for the assessment years 1949-50 to 1953-54. The petitioner was also informed that although income-tax for these five years would not be charged, super-tax at the rate of one anna in a rupee would be levied and the shareholders of the petitioner-company would be liable to pay tax on the dividends paid by the company without the dividends being grossed up under section 16(2) of the Act.
3. Now, the petitioner's assessments for the assessment years 1949-50 and 1950-51, which were pending, when the concession under clause (15) of the Concessions Order was granted to the petitioner as aforesaid, were completed thereafter on the 17th of August, 1950, and the 1st of February, 1951, respectively by the Income-tax Officer, Satara North. In these assessments only interest on deposits in British India was taxed under the Indian Income-tax Act at the usual rates while on the entire business income of the company only super-tax at one anna in the rupee was levied. A part of the income of the company, which was from agriculture, was exempted altogether. Against the assessment order for the year 1950-51 the petitioner appealed to the Appellate Assistant Commissioner as against the assessment of its interest income at the maximum rate, but the said appeal was dismissed by the Appellate Assistant Commissioner. Subsequently, on the 5th of March, 1958, the Income-tax Officer, Special Circle, Bombay South, Poona, served on the petitioner two notices under section 34(1)(a) for the purpose of reassessing its income for the assessment years 1949-50 and 1950-51 on the ground that he had reason to believe that the income for these years had escaped assessment or had been under-assessed. It is these two notices, which are challenged by the petitioner in the present writ petition.
4. The petitioner alleged that before coming to this court on the present writ petition, it made representations to the Income-tax Officer contending that the proceedings under section 34(1)(a), which are contemplated to be initiated against it under the notices issued to it, were unwarranted and illegal and calling upon him to drop the said proceedings. Ultimately, on the 21st or 23rd of February, 1962, the respondent, who is the Income-tax Officer, Companies Circle II(3), Bombay, informed the petitioner that he intended to proceed and complete the assessments, which he had initiated under section 34(1)(a) for the assessment years 1949-50 and 1950-51. The petitioner alleges that having thus demanded justice from the Income-tax Officer and having failed to obtain the same, it has filed the present writ Petition in this court.
5. The main argument of the petitioner in the present petition is that the Income-tax Officer had no jurisdiction to issue the notices under section 34(1)(a) as the conditions precedent to the exercise of the said jurisdiction have not been satisfied in the present case. It is the contention of the petitioner that there has been no under-assessment since the assessment as made by the Income-tax Officer is the proper and correct assessment that could have been made against it in view of the concession granted to it under clause (15) of the Concessions Order. In the second place it says that even if there be any under-assessment the said under-assessment was not as a result of concealment or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the said assessment years. There are also no circumstances whatever present from which it could conceivably be said that the Income-tax Officer had reason to believe that the under-assessment was due to any concealment or omission on the part of the assessee. The petitioner has alleged in its petitions that at the time of making the assessments for the years 1949-50 and 1950-51, the Income-tax Officer was aware that a part of the business income of the assessee included sale proceeds which were received in the territories formerly known as British India. During the course of the assessment proceedings, the petitioner had appeared before the Income-tax Officer from time to time and had explained to him in full detail the manner in which the sales of sugar were effected and the manner in which and the place at which the sale proceeds were received by the petitioner. According to the petitioner, the assessments as were made by the Income-tax Officer for the assessment years 1949-50 and 1950-51 were on the view that he took of the concession granted to the petitioner by the Central Government and the legal view which he entertained as to the accrual and receipt of the said income. The petitioner's contention is that the present proceedings, which are sought to be initiated under section 34(1)(a) are merely as a result of a different view entertained by the Income-tax Officer, who seeks to initiate the proceedings either with regard to the interpretation of the Concessions Order or with regard to the legal position as regards the accrual and receipt of income. Such a change of view entertained by the new Income-tax Officer does not entitle him to re-open the assessment under section 34(1)(a) of the Indian Income-tax Act.
6. In reply to the petition, an affidavit has been filed on behalf of the respondent on the 19th of July, 1962. The rule nisi issued on the petitioner's application was made returnable on the 11th of June, 1962. The affidavit filed on behalf of the respondent, therefore, is beyond the time permitted by the rule 627 of the Original Side Rules of this High Court which requires the affidavit in reply to be filed at least two days before the returnable date of the rule. Mr. Kaka, learned counsel for the petitioner, has, therefore, asked us not to accept the affidavit in reply held on behalf of the respondent. We find, however, that under rule 204 of the said Rules the affidavit filed beyond the time prescribed can be allowed to go on record with the leave of the court and since the delay in the filing of the affidavit is only a very short one, we are not inclined to refuse leave to the respondent to file his affidavit. Mr. Kaka has urged that in case we allow the affidavit to be filed, he should be allowed to file an affidavit in rejoinder, which he has tendered before us. We do not, however, think it necessary to admit any affidavit in rejoinder in the present case. We do not, therefore, propose to take the affidavit in rejoinder on the record of this case.
7. Now, in the affidavit in reply filed on behalf of the respondent, the petitioner's allegation that the Income-tax Officer, who made the assessments for the years 1949-50 and 1950-51, was aware that a part of the business income included sale proceeds, which were received in the territories formerly known as 'British India', is denied. It is also denied that during the course of the assessment proceedings for the said years, the petitioner had explained to the Income-tax Officer concerned in full detail the manner in which the sales of sugar were effected by the petitioner, and the manner and the place at which the sale proceeds were received by the petitioner. It has, however, been admitted that the petitioner had represented to the Income-tax Officer concerned that the procedure of sales was as given by the petitioner in its letters dated 17th June, 1944, and 31st October, 1944, and copies of the said letters were annexed to the affidavit in reply as annexure (1) collectively. Since in a writ petition we cannot go into disputed facts, we will have to consider the contentions raised on the basis of the admitted facts and, therefore, the contention of the petitioner that it had not concealed or omitted to make a full and complete disclosure of all material facts necessary for the assessment will have to be decided on the basis of such disclosures as are contained in its letters dated 17th June and 31st October, 1944.
8. Now, as we have already pointed out earlier, the two main contentions, which are raised on behalf of the petitioner, are, firstly, that there has been no under-assessment and, secondly, if there has been an under-assessment, it is not as a result of any concealment or omission or failure on the part of the petitioner to disclose fully all the material facts. As to the first of these contentions, the argument of Mr. Kaka, learned counsel for the petitioner, is that on a proper construction of the concession granted to the petitioner under clause (15) of the Concessions Order, the entire business income of the petitioner is exempted from levy of income-tax irrespective of the place of accrual or receipt of the income. Now, the concession granted to the petitioner, as intimated to it by the Commissioner of Income-tax, Bombay South, by his letter of the 8th of July, 1950, is that the Phalton Sugar Works Ltd. is exempted from payment of income-tax for the assessment years 1949-50 and 1950-51 to 1953-54. Super-tax, however, would be charged at one anna in the rupee for the said assessment years, and the shareholders of the company would be liable to pay tax on the dividends paid by the company without the dividends being grossed up under section 16(2). According to Mr. Kaka, the concession as it is worded exempts the payment of the entire income-tax, which was leviable on the assessee and it is not merely confined to the income-tax, which would be leviable on that part of the income, which was not subject to the levy of income-tax under the Indian Income-tax Act, 1922, until that time. Since, under the concession, no income-tax was leviable at all, but only super-tax, the assessment orders for the relevant years have been properly made and there has been no under-assessment. The contention, on the other hand, on behalf of the respondent is that the concession relates not to the entire income-tax, but only to that levy, which would come in as a result of the extension of the Indian Income-tax Act to the merged territories. According to the respondent, inasmuch as exemption has been wrongly granted in the relevant assessment years in respect of the entire income-tax, there has been an under-assessment.
9. In order to appreciate these rival contentions, it would be necessary in the first place to consider the scope and ambit of section 60A, under which the concession order has been issued by the Central Government. Section 60A, so far as is material for our purpose, is in the following terms :
'60A. If the Central Government consider it necessary or expedient so to do for avoiding any hardship or anomaly, or removing any difficulty, that may arise as a result of the extension of this Act to the merged territories... the Central Government may, by general or special order, make an exemption, reduction in rate or other modification in respect of income-tax in favour of any class of income, or in regard to the whole or any part of the income of any person or class of person.'
10. This section, as we have already stated, was introduced by the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, and the object and purpose in enacting it was to avoid hardships and anomalies and for removing difficulties, which were likely to arise as a result of the extension of the Indian Income-tax Act to the merged territories. The general or special order, which this section enabled the Central Government to make, would, therefore, have to fall within the ambit of this section and must in its operation be confined to the removal of hardship or anomaly or difficulty caused by the extension of the Act. The concession granted under the Order made by the Central Government under the provisions of this section has, therefore, to be construed and understood in the light of the scope of the order. Now, so far as the assessees like the petitioner, who had their industrial undertaking in the former States are concerned, the position before the merger was that while their income accruing or arising in the State was not subject to the Indian Income-tax Act, the income, which arose or accrued or was deemed to accrue or arise in the taxable territories, was subject to the Indian Income-tax Act. Thus, even during the years prior to merger, such income of the assessee, as was found to be chargeable to tax under the Indian Income-tax Act, was charged under the said Act. The extension of the Indian Income-tax Act to the merged territories did not create any hardship or any difficulty so far as this income was concerned. Such income was already subject to the Indian Income-tax Act and the extension of the Act to the merged territories did not affect that position. The position, however, was affected so far as the income, which was not formerly subject to the Indian Income-tax Act, but would now be taxed as a result of the extension of the Act. There would, therefore, be hardship only with regard to that part of the income and the concession, which the Central Government would be empowered to grant and which the petitioner would be entitled to seek, would be confined to that part of the income which was not subject to tax prior to the extension of the Act. The exemptions granted by the Central Government to the petitioner in the present case, therefore, will, on a proper construction thereof, have to be regarded as confined to the income in respect of which it enjoyed a partial or total exemption from payment of income-tax under its agreement with the Phalton Darbar.
11. Mr. Kaka has argued that although the power under section 60A can be exercised by the Central Government only if it forms the opinion that difficulties, hardships and anomalies are likely to arise by the extension of the Act to the merged territories and that it is necessary and expedient to avoid or remove such hardships, anomalies or difficulties, once the said conditions preliminary to the exercise of the powers is satisfied, the exercise of the power is without any restrictions or limitations. Relying on the language used in the latter part of the main provision of section 60A, he has argued that the power extends to 'make an exemption, reduction in rate or other modification in respect of income-tax in favour of any class of income or in regard to the whole or any part of the income of any person or class of persons.' Mr. Kaka says that the Concession Order, which the Central Government has made in the exercise of the power, also shows that it is not confined merely to the income, which was become subject to tax by reason of the extension of the Act, but also extends to the income, which was already taxable under the Income-tax Act before its extension to the merged territories. He has in that connection invited our attention to clauses (4) and (15) of the Concessions Order. According to Mr. Kaka, therefore, if the interpretation which he puts on section 60A and the order made under it are correct, there is no reason to read the words granting exemption to the assessee in the order made under clause (15) in a restricted sense and regard it as referable only to the exemption of the tax which the assessee enjoyed in the erstwhile Phalton State.
12. We cannot accept the submission urged by Mr. Kaka. The delegation of the power to the Central Government under section 60A was occasioned because the legislature envisaged that the extension of the Indian Income-tax Act to the merged territories was likely to create hardships and anomalies and difficulties, which it may be necessary and expedient to avoid or remove. Since it was neither possible nor practicable for the legislature itself to examine the vast number of cases that might arise and provide for them in the legislation it left the work to its delegate, namely, the Central Government by empowering it to do so by a general or special order. In doing so, it laid down the circumstances under which the power could be exercised, the policy underlying the exercise and the limits within which the power has to be exercised. Thus the power could be exercised only in the event of the extension of the Act having given rise to hardships, anomalies or difficulties, which are necessary to be avoided or removed and the power had to be exercised so as to avoid the hardships or anomalies or to remove the difficulties and, therefore, necessarily to that extent only. The first part of the main provision of section 60A, therefore, does not only prescribe the conditions which have to be satisfied preliminary to the exercise of the power, but defines further the purpose of the exercise of the power and the extent to which the said power can be exercised. The general or special order, which the Central Government is empowered to make under this provision, has, therefore, to be confined within the limits of its powers and can extend only to achieve the object and purpose for which the power has been delegated, namely, to avoid the hardships and anomalies and to remove the difficulties arising by the extension of the Act. Having regard to these considerations, the relief of exemption, reduction in rate or other modification of income-tax, which the Central Government can grant, cannot be unlimited but only restricted to the avoidance of hardships or anomalies or removal of difficulties and the words 'any class of income' or 'whole or part of the income of any person or class of persons' must, therefore, mean 'any class of income' or 'whole or part of income-tax of any person or classes or persons' such as are affected by the extension of the Indian Income-tax Act to the merged territories in a manner so as to give rise to hardships, anomalies or difficulties. We cannot, therefore, accept the interpretation, which Mr. Kaka wants to give to the provisions of section 60A of the Act. Nor do we agree with him that the provisions of the Concessions Order which the Central Government has made under the said section supports the interpretation which he wants to give to the said section.
13. Paragraph 4 of the Order states that the provisions of paragraphs 5, 6, 9, 10 and 11 of the Order shall apply to income arising in the former Indian States, which was formerly dealt with under section 14(2)(c) of the Indian Income-tax Act, 1922, and which provision was deleted by the Extension to Merged States and Amendment Act, 1949. Mr. Kaka relies on this paragraph for his argument that the provision indicates that only the paragraphs mentioned in this provision are intended to relate to the income arising in the erstwhile Indian States, while the rest of the provisions are intended to apply to all other income including income unaffected by the extension of the Act. In our opinion, the argument is clearly fallacious. From the mere circumstance that certain paragraphs provide for a particular class of income, which is affected by the extension of the Act, it does not necessarily follow that the other provisions apply to the unaffected income. Whether there is any such provision has to be found by an actual examination of the other provisions and Mr. Kaka has not been able to point out to any such provision except that of paragraph 15. Now, that provision also, in our opinion, does not help him in his submission. It is a provision, which deals with the subject of special concessions or exemptions which were granted to industrial undertakings in the former Indian States by the rulers thereof. Where there was no such special concessions or exemptions but the case was dealt with under such laws or rules relating to income-tax as were applicable in the States, provision for such ordinary cases was made in paragraphs 5 to 14 of the Order. In many Indian States, however, the rulers of the States, with a view to develop the industrialisation of the States, had granted concessions and exemptions to industrial undertakings in the matter of income-tax, super-tax or business profits tax. These concessions and exemptions could not be availed of after the merger of the States and the extension of the Indian Income-tax Act to the States. A provision was, therefore, made in paragraph 15 for such cases. The relief, which was intended to be given under this paragraph, related to the concession and exemption enjoyed in the erstwhile Indian State and also confined to the subject of the said exemption and concession. The application, which was required to be made under the said provision and the particulars, which were required to be furnished therein, would clearly show that the nature of relief, which could be claimed under the provision or the relief which could be granted thereunder, was only related to the concession and exemption enjoyed in the erstwhile State. Since the concession or exemption granted by the ruler of the State could not extend to the income, which was taxable under the Indian Income-tax Act even before merger, the relief under section 15 could not be granted in respect of that income. We, cannot, therefore, accept Mr. Kaka's submission that paragraphs 4 and 15 of the Concessions Order support his submissions.
14. The result of the aforesaid discussion is that the exemption granted by the Central Government to the assessee under clause (15) of the Concessions Order was only in respect of the income in the erstwhile Phalton State and did not in any way affect the income, which accrued or arose to him in the former taxable territories under the Indian Income-tax Act. Therefore, if in the income of the relevant assessment year, there was any income of the assessee, which arose or accrued to it in the said taxable territories, which was leviable to tax at the rates under the Indian Income-tax Act, exemption of income-tax allowed in the said assessments in respect of the said income would amount to an under-assessment. The contention, therefore, that there could not have been any under-assessment in the present case in view of the concession granted to the petitioner cannot be accepted. In addition to the argument based on the proper construction of the concession granted to the petitioner, Mr. Kaka also has advanced certain other arguments for his contention that there has been no under-assessment. These contentions are that on a proper construction of clauses (5) and (6) of the Taxation Concessions Order, the petitioner has been rightly taxed in the assessment years 1949-50 and 1950-51; that after the merger the entire territories having become taxable territories, the whole of the income of the petitioner has arisen in the taxable territories and no distinction is capable of being made in the income on the basis that it was received in the former State territory or the former taxable territories, and no part, therefore, could be exempted from the operation of the Concessions Order. According to him, therefore, the Income-tax Officer's belief that there has been an under-assessment is based on a wrong legal assumption on his part that distinction between the State territories and taxable territories still continued to exist even after the merger of the State.
15. Now, we do not think that any of these additional arguments has got any substance and it must be said in fairness that Mr. Kaka also has not made a very serious attempt to press any of them. As to the first of these contentions, there is no question of the operation of clauses (5) and (6) to the present assessment orders, because the assessment orders proceed on the basis of the concession granted under the clause (15) without turning to either clause (5) or clause (6) of the Concessions Order. The argument that the entire territory now being a taxable territory, there could not be a distinction between the income accruing to the petitioner on the basis of the place of receipt or accrual again has no substance because although the entire territory has now become a taxable territory, the distinction has still been considered for the purpose of several provisions introduced in the Income-tax Act by the Extension of Merged States and Amendment Act of 1949 and the Concessions Order. It could not, therefore, be said as contended by Mr. Kaka, that the Income-tax Officer has erred in proceeding on the basis of the distinction between income in the former State and in the former taxable territories in coming to the conclusion that there has been an under-assessment in the present case. In our opinion, therefore, the first contention of Mr. Kaka that there being no under-assessment in the present case, one of the conditions for assuming jurisdiction under section 34(1)(a) is not satisfied, cannot be accepted.
16. It is, however, not enough that there should be an under-assessment, but it is further necessary that the Income-tax Officer must have reason to believe that the under-assessment has been occasioned as a result of the failure or omission on the part of the assessee to disclose fully all the material facts relevant for his assessment in order that he may assume jurisdiction under section 34(1)(a) and, in our opinion, Mr. Kaka's contention that there was no concealment, failure or omission on the part of the assessee to disclose fully the material facts necessary for its assessment, which could have been the cause of the under-assessment, is correct.
17. As we have already stated earlier, for the purpose of finding out whether there has been a failure, concealment or omission on the part of the assessee to disclose fully the material facts we will have to proceed on the basis that the facts as were disclosed by the assessee were such as were contained in its letters dated 17th June and 31st October, 1944. But before proceeding to consider the facts as disclosed in the said letters, it would be necessary to appreciate what is meant by the expression 'material facts', which it is obligatory for the assessee to disclose before the Income-tax Officer at the time of his assessment.
18. In Calcutta Discount Co. v. Income-tax Officer, Calcutta, their Lordships of the Supreme Court pointed out :
'In every assessment proceeding, the assessing authority would, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority had to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority had to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable.... So far as primary facts were concerned, it was the assessee's duty to disclose all of them - including particular entries in account books, particular portions of documents, and documents and other evidence which could have been discovered by the assessing authority, from the documents and other evidence disclosed. The duty, however, did not extend beyond the full and truthful disclosure of all primary facts.... Once all the primary facts were before the assessing authority... it was for him to decide what inferences of facts could be reasonably drawn and what legal inferences had ultimately to be drawn. It was not for anybody else - far less the assessee - to tell the assessing authority what inferences, whether of facts or law, should be drawn.'
19. It is clear from these observations of the Supreme Court that the duty of the assessee is to disclose all the primary facts necessary for his assessment and concealment, failure or omission on his part to disclose the material facts within the meaning of section 34(1)(a) must be the concealment, failure or omission to disclose the primary facts. We have now to see whether all such primary facts as were necessary to be disclosed have been disclosed by the petitioner in the letters, which, according to the affidavit filed on behalf of the respondent, contained the representations made by the petitioner to the taxing authorities at the time of its assessment.
20. Now, in the first of these letters, which appears to be in reply to certain inquiries made by the Income-tax Officer, the petitioner has stated that the sale memos for the period April 1, 1942, to September 30, 1943, were innumerable and it would take the petitioner a fortnight's time to prepare lists showing particulars of name, address and value of sugar, etc., and that it would be sending these particulars as soon as they were ready. It was further stated that although the control order issued by the Government of India did not apply to the company, the control order issued by the Phalton Darbar did, and under the said order of the Darbar the company was directed to sell sugar only to recognised dealers and persons specially authorised by the Controller, who was the Dewan Saheb of the Phalton State and that during the relevant period sugar was sold to authorised parties through the Sugar Controller of Phalton State although no direct contract was made with any of the parties. Usually, communications were received by the Controller of Sugar of the Phalton State from the Director of Civil Supplies directing despatch of sugar bags to various districts according to the instructions of the Collectors concerned, and the bags were sold at the factory and the said sale proceeds were received in Phalton. In the second letter dated 31st October, 1944, the petitioner stated the course of dealings as follows :
'The Director of Civil Supplies writes to the Dewan and Sugar Controller, Phalton State, to instruct the company to despatch bags of sugar to the districts according to the instructions that may be received from the District Magistrates. The District Magistrate forwards a list of merchants authorised to receive sugar allotments out of the quotas assigned to the districts. The merchants send their respective permits to the company with cheques in payment of price. After the price is received the bags are despatched to the respective merchants, some of the merchants come to the factory and pay the price in cash. The price fixed by the Controller is ex-factory.'
21. It was then pointed out in the said letter that the delivery was always ex-factory, the goods being delivered either to the parties themselves or to their transport agents on behalf of the parties and in all cases payments were received at the factory. The letter then proceeded to state :
'As has already been stated in the previous letter, contract of sale is with the British Indian authorities through the Phalton authorities and not with any British Indian party directly. As stated above, some of the parties personally come and receive the goods at the factory, while in other cases, goods are delivered to the transport agents after price thereof is received in advance.'
22. Now on reading the contents of these letters, it would be clear that the fact that the sales were to merchants in the taxable territories out of the State was disclosed. The fact that some of the merchants sent their permits and cheques in payment of the price while the others came personally with their permits and received the goods on payment of the price is also disclosed. It is also disclosed that delivery has been given ex-factory either to the parties who came personally or to their transport agents. Above all, it is stated that payment has always been received at the factory.
23. Mr. Joshi has argued that in all these facts, which are disclosed, a very material fact, viz., that the merchants to whom sugar was delivered at the factory sent cheques in payment of the price of the goods purchased by them by post either at the express or implied request of the petitioner, has not been disclosed in those two letters. That, according to him, was a very material fact necessary in the assessment of the assessee, because on that fact depended the accrual of the income in the case of the sales made by the company. The facts disclosed, according to Mr. Joshi, appear to indicate that payments were received at the factory without there being any indication that a number of these, at any rate, were by cheques, which were sent by post.
24. Now, it is true that there is no specific reference in the facts disclosed that cheques or some of them were sent by post by the merchants. It cannot, however, be said that that was because of an attempt on the part of the petitioner to make a deliberate concealment or omission of this fact. It must be remembered that at the time when these facts were disclosed, i.e., in 1944, the particular significance attaching to the fact that the cheques were sent by post could not be said to have been properly appreciated either by the petitioner or the income-tax department. The said significance became important after the decision of the Supreme Court in Ogale's case. It could not, therefore, be said that the failure on the part of the petitioner to specifically refer to the post office in his letters was either deliberate or out of any oblique motive. The petitioner, as a matter of fact, had stated that cheques and permits were sent by the merchants and if the significance attaching to the sending by post was present to the mind of the Income-tax Officer, he could easily have made further inquiries and obtained further information. Moreover, in the context of the facts disclosed in the letter, viz., that some of the merchants came personally and received the goods, some of them sent their permits and payments and goods were delivered to their transport agents after receipt of payment in advance and that the merchants receiving sugar under the permits issued to them from the petitioner-company were spread out in the several districts outside the State would indicate that in the normal course of business practice the permits and the cheques, which were sent by the merchants from the several districts, were sent by post. At any rate, it could not be said that any facts were not disclosed by the petitioner from which or from the further facts inferred as a result of the said facts, all the primary facts necessary for the purpose of drawing further factual inferences or legal inferences were not made available to the Income-tax Officer. Mr. Kaka has invited our attention to Maharaja Shri Umaid Mills Ltd. v. Income-tax Officer, Central Circle IV, New Delhi, which is a decision of the Punjab High Court, wherein a view has been taken that the disclosure of the figures relating to the sales in British India by the assessee was a sufficient disclosure of the primary facts for his assessment. In the present case, the facts disclosed go much further than the mere figures of the sales in British India and furnish adequate information of the necessary primary facts from which the Income-tax Officer could have easily drawn the necessary factual and legal inferences. In our opinion, therefore, Mr. Kaka's contention that the condition of section 34(1)(a) that the Income-tax Officer must have reason to believe that the under-assessment is due to a failure or omission on the part of the petitioner to disclose fully all the material facts necessary for its assessment is not satisfied in the present case and, consequently, the Income-tax Officer had no jurisdiction to issue the notices, which have been challenged by the petitioner in the present petition.
25. In our opinion, therefore, the petitioner is entitled to succeed in the present petition and is entitled to a writ quashing the notices issued by the respondent under section 34 of the Act on the 4th of March, 1958, relating to the reopening of the assessments for the assessment years 1949-50 and 1950-51 and is also entitled to a further order restraining the respondent from taking any steps or proceedings in enforcement, furtherance, pursuance or implementation of any of the said notices.
26. We order accordingly. Petitioner will be entitled to its costs from the respondent.
27. The respondent mentioned in the petition is Shri B. J. Chackoo, Income-tax Officer, Companies Circle II(3), Bombay. It has been stated on behalf of the income-tax department that the said officer has now been transferred and another officer, viz., Shri J. P. Sharma, is the present Income-tax Officer. The name of the present Income-tax Officer, therefore, may be substituted for Shri B. J. Chackoo in the description of the respondent.