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income-tax Officer, a Ward and anr. Vs. Sirpur Paper Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Appeal No. 410 of 1976 and Writ Petition No. 1541 of 1975
Judge
Reported in[1978]113ITR393(AP)
ActsIncome Tax Act, 1961 - Sections 147 and 148; Constitution of India - Article 226
Appellantincome-tax Officer, a Ward and anr.;sirpur Paper Mills Ltd.
RespondentSirpur Paper Mills Ltd.;income-tax Officer, A-ward and anr.
Appellant AdvocateP. Rama Rao, Adv. in W.A. No. 410 of 1976 and ;K. Srinivasa Murthy and ;S.R. James, Advs. in W.P. No. 1541 of 1975
Respondent AdvocateP. Rama Rao, Adv. in W.P. No. 1541 of 1975 and ;K. Srinivasa Murty and ;S.R. James, Advs. in W.A. No. 410 of 1976
Excerpt:
direct taxation - criterion for reassessment - sections 147 and 148 of income tax act, 1961 and article 226 of constitution of india - notice issued under sections 147 and 148 to reopen assessment for some years - notice challenged by assessee on ground that concerned officer had no jurisdiction to issue notice because circumstances justifying exercise of power under these sections do not exist - at time of original assessment if assessee had disclosed all primary facts then there would be no concealment of income and provision of section 147 (a) could not be invoked - it was on tax authorities to draw appropriate inference on facts available - assessee was at no fault - held, notice issued liable to be quashed. - - 4. under section 147(a) of the income-tax act, 1961, if the.....b.j. divan, c.j. 1. the writ appeal arises out of w.p. no. 2557 of 1974. both the writ appeal and writ petition no. 1541 of 1975 relate tothe same assessee and the same question arises in both the cases and hence we will dispose of both of them by this common judgment. 2. writ appeal no. 410 of 1976 arises out of assessment year 1965-66, whereas writ petition no. 1541 of 1975 arises out of assessment year 1966-67. in each of these matters, the department has sought to reopen the assessments for the relevant years, i.e., assessment years 1965-66 and 1966-67, respectively, by issuing notices under sections 147 and 148 of the income-tax act, 1961. in each of these matters, the notices have been challenged by the assessee on the ground that the income-tax officer concerned has no jurisdiction.....
Judgment:

B.J. Divan, C.J.

1. The writ appeal arises out of W.P. No. 2557 of 1974. Both the writ appeal and Writ Petition No. 1541 of 1975 relate tothe same assessee and the same question arises in both the cases and hence we will dispose of both of them by this common judgment.

2. Writ Appeal No. 410 of 1976 arises out of assessment year 1965-66, whereas Writ Petition No. 1541 of 1975 arises out of assessment year 1966-67. In each of these matters, the department has sought to reopen the assessments for the relevant years, i.e., assessment years 1965-66 and 1966-67, respectively, by issuing notices under Sections 147 and 148 of the Income-tax Act, 1961. In each of these matters, the notices have been challenged by the assessee on the ground that the Income-tax Officer concerned has no jurisdiction to issue the notices, since the circumstances justifying the exercise of the power under these Sections do not exist in the instant case.

3. The assessee in each of these matters is a limited company and the same question arises in both the matters. The assessee, in its return for the relevant assessment years, disclosed for each year an item of Rs. 20,000 as amount spent under the head 'Workmen and staff welfare expenses'. In each of the years, when the assessment was completed, the petitioner claimed deduction of this amount of Rs. 20,000 because it was claimed that the vice-president of the company spent the amount at his discretion for pacifying the troublesome elements amongst the workmen employed by the company. This explanation on behalf of the company was accepted by the Income-tax Officer in each of the two years under consideration. Subsequently, for the assessment year 1971-72, when the same amount of Rs. 20,000 was claimed as a deduction on the same grounds, the Income-tax Officer held that, in the absence of vouchers, he would not permit any such deduction. Thus, so far as the assessment years under consideration are concerned, the deduction had become final and in the light of the decision for the assessment year 1971-72, the Income-tax Officer issued the notices under Sections 147 and 148 of the Income-tax Act, 1961. It has been pointed out in the counter-affidavits in these two matters that, on a scrutiny of the assessments for 1971-72 and 1968-69, it came to light that the lump sum amount was spent by the vice-president at his discretion and that the expenditure was not supported by vouchers. No evidence could be let in to prove that the amount was spent for the purpose of the business of the company. Subsequent to the completion of the assessment, the Income-tax Officer came to know that there were absolutely no vouchers evidencing the said expenditure and that the said expenditure appeared to have been allowed without any verification and that it was also not verified whether the expenditure incurred was necessary and incidental to the business aud, under these circumstances, the notices for reassessment were issued.

4. Under Section 147(a) of the Income-tax Act, 1961, if the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income-tax Officer, or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, he may, subject to the provisions of Sections 148 - 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. Under Section 148(1), before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the assessee a notice under Sub-section (2) of Section 139 ; and the provisions of the Act shall, so far as may be, apply accordingly as if the notices were a notice issued under that sub-section. Under Section 149(1)(a)(i), no notice under Section 148 shall be issued in cases falling under Clause (a) of Section 147 for the relevant assessment year, if eight years have elapsed from the end of that year. It was nobody's case that the requirements of Section 149(1)(a)(ii) which permit issuance of notice even after eight years but not later than sixteen years from the end of the assessment year under consideration, have arisen in this case.

5. As to what exactly is the scope of Section 147(a) has been the subject-matter of several decisions of the Supreme Court and of various High Courts. The locus classicus is the decision of the Supreme Court in Calcutta Discount Co Ltd. v. Income-tax Officer : [1961]41ITR191(SC) and in that case, for the first time it was laid down that if the assessee, at the time of the original assessment, had disclosed all the primary facts, then there could not be said to be any concealment of the income and the provisions of Section 147(a) or Section 34(1)(a) of the Indian Income-tax Act, 1922, could not be invoked.

6. After this decision in Calcutta Discount Co. Ltd.'s case : [1961]41ITR191(SC) there have been several decisions of the different High Courts in connection with the requirements of Section 147(1). The majority of the learned judges, who decided in Calcutta Discount Co. Ltd.'s case : [1961]41ITR191(SC) held that the law did not require the assessee to state the conclusion that could reasonably be drawn from the primary facts. The question of the assessee's intention was an inferential fact and so the assessee's omission to state its true intention behind the sale of shares in that case could not be considered to be a failure or omission to disclose any material fact within the meaning of Section 34 of the Indian Income-tax Act, 1922. All the decisions of the different High Courts and of the Supreme Court up to December, 1972, were considered by a Full Bench of the Gujarat High Court in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) . One of us (Chief Justice) delivered thejudgment of that Full Bench and the principles which were deduced from a consideration of all the decisions bearing on the point were summed up at page 274 of the report as follows :

'It is thus clear that, according to the interpretation put by the Supreme Court on the requirements of Section 34(1)(a), whenever action of the Income-tax Officer in issuing the notice under Section 34(1)(a) is challenged before a court of law, the court has to ask itself the question whether in fact there are reasonable grounds for the Income-tax Officer to believe that there had been non-disclosure as regards any fact which could have a material bearing on the question of assessment. If such reasonable grounds exist, that by itself is sufficient to give him jurisdiction to issue the notice. Of course, this action of issuing the notice under Section 34(1)(a) can be challenged on either of two grounds and that challenge is only, to a limited extent, viz., (1) that the Income-tax Officer did not in fact hold the belief that there had been such non-disclosure; (2) that the belief must be held in good faith ; it could not be merely a pretence ; and it is not open to the court to examine the question whether the reasons for the belief have a rational connection to the formation of such belief and are not extraneous or irrelevant to the purpose of the section. On the one hand, according to the Supreme Court, once the two conditions are satisfied, a notice can be issued under Section 34(1)(a) and subject to the limited extent of the challenge to the action of the Income-tax Officer, if there are reasonable grounds for him to believe that there had been any non-disclosure as regards any fact which could have a material bearing on the question of under-assessment, the issuance of the notice under Section 34(1)(a) would be valid. It is not for the court to consider whether these grounds are adequate or not. The sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. Moreover, the assessee is not bound to put forward before the Income-tax Officer at the time of the original assessment, a version contrary to what he contends for or contrary to what he has written in his books of account. In certain circumstances the question whether a particular transaction is genuine or not is an inference to be drawn from primary facts. 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 those facts. Further, where on the evidence and material produced at the time of the original assessment the Income-tax Officer could have reached a conclusion other than the one which he has reached, the proceeding under Section 34(1)(a) will not lie merely on the ground that the Income-tax Officer had earlier raised an inference which he may later regard as erroneous.'

7. In our opinion, the last portion of the passage quoted above has abearing on the facts of this case, viz., that it was not for the assessee to point out the various possible inferences which could be drawn from the primary facts which he had disclosed. His duty is to disclose the primary facts and leave it to the Income-tax Officer to draw the appropriate inference. If, at the time of the original assessment, the Income-tax Officer could have reached a different conclusion, i.e., different from the one which he actually reached on the earlier occasion, it would not be open to him to resort to Section 147(a) merely on the ground that subsequently he came to regard as erroneous the conclusion which he had earlier reached. The facts of the case in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) illustrate this aspect of the legal position.

8. It may be pointed out that, in the recent decision in Parashuram Pottery Works Co. Ltd. v. Income-tax Officer : [1977]106ITR1(SC) the Supreme Court has reiterated the same legal position and it is clear from this latest decision that the legal position is the same as was summarised by the Full Bench of the Gujarat High Court in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) . In Parashuram Pottery Works Co. Ltd. v. Income-tax Officer : [1977]106ITR1(SC) , it was held by the Supreme Court that where, in working out the figures of depreciation for certain items of capital assets, the Income-tax Officer lost sight of the fact that the aggregate of the depreciation, including the initial depreciation allowed under the different heads, could not exceed the original cost to the assessee of these items of capital assets, the assessee cannot be held responsible for the remissness on the part of the Income-tax Officer in not applying the law contained in proviso (c) to Section 10(2)(vi) of the Indian Income-tax Act, 1922, and it cannot be said that excess depreciation allowed because of the mistake in the calculation of the depreciation, was allowed and income escaped assessment because of the assessee's omission or failure to disclose fully and truly all material facts and no action can be taken for reopening the assessment under Section 147(a) of the Income-tax Act, 1961, on the basis of detection of that mistake alone after the expiry of four years from the end of the assessment year. At page 8 of the report, Khanna J., speaking for the Supreme Court, has observed :

'It would appear from what has been discussed above that one of the essential requisities for proceeding under Clause (a) of Section 147 of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before usto show that in the return filed by the assessee-appellant, the particulars given were not correct... The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March, 1945, and before the 1st day of April, 1956, is normally claimed and allowed. It seems that the Income-tax Officer, in working the figures of depreciation for certain items of capital assets, lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in Clause (c) of the proviso to Section 10(2)(vi) of the Act of 1922. As observed by Shah J., in Commissioner of Income-tax v. Bhanji Lavji : [1971]79ITR582(SC) , Section 34(1)(a) of the Act of 1922 (corresponding to Section 147(a) of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law.' Khanna J. further observed at page 10 of the report : 'It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under Section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.'

9. The legal position was summarised by the Full Bench of the GujaratHigh Court in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) of the report, as stated above, on a consideration of the decisions of the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer : [1961]41ITR191(SC) Kantamani Venkata Narayana and Sons v. Income-tax Officer : [1967]63ITR638(SC) S. Narayanappa v. Commissioner of Income-tax : [1967]63ITR219(SC) Commissioner of Income-tax v. Hemchandra Kar : [1970]77ITR1(SC) Modi Spinning and Weaving Mills Co. Ltd. v. Income-tax Officer : [1970]75ITR367(SC) Sowdagar Ahmed Khan v. Income-tax Officer : [1968]70ITR79(SC) and Commissioner of Income-tax v. Burlap Dealers Ltd. : [1971]79ITR609(SC) . As is clear from Parashuram Pottery Works Co. Ltd. v. Income-tax Officer : [1977]106ITR1(SC) , which is the latest decision on the point, the Supreme Court has not departed from that legal position.

10. In order to highlight the position as to the extent to which these legal principles have been applied, it would not be out of place to state the facts of the case in Commissioner of Income-tax v. Burlop Dealers Ltd. : [1971]79ITR609(SC) . The assessee before the Supreme Court was a limited company. The assessee stated at the time of filing of its return for the assessment year 1949-50, that on June 5, 1948, it had entered into an agreement with H. Manory Ltd. to do business in plywood chests and in consideration of financing the business, the assessee was to receive 50% of the profits of the business. The assessee also claimed that it had entered into an agreement on October 7, 1948, with Ratiram Tansukhrai for financing the transactions of H. Manory Ltd. in the joint venture, and had agreed to pay to Ratiram Tansukhrai 50% of the profit earned by it from the business with H. Manory Ltd. Stating these facts, for the assessment year 1949-50, the assessee submitted the profit and loss account disclosing in the relevant year of account Rs. 1,75,875 as profit in the joint venture from H. Manory Ltd. It also claimed that an amount of Rs. 87,937, being half of the amount of this profit from H. Manory Ltd., had been paid by the assessee to Ratiram Tansukhrai under the agreement of October 7, 1948. The Income-tax Officer accepted the return filed by the assessee and included in computing the total income for the assessment year 1949-50, Rs. 87,937 only, as the profit earned in the joint venture of H. Manory Ltd. In the assessment year 1950-51, the assessee filed a return also accompanied by a profit and loss account disclosing a total profit of Rs. 1,62,155 in the relevant accounting years as the profit recciyed from H. Manory Ltd., and claimed that out of this amount of profit, it had transferred Rs. 81,007 to the account of Ratiram Tansukhrai as his share. The Income-tax Officer, on examination v of the transaction, brought to tax the entire amount of Rs. 1,62,155 holding that the alleged agreement of October 7, 1948, between the assessee and Ratiram Tansukhrai had merely been 'got up as a deviceto reduce the profits received from H. Manory Ltd.' This order was confirmed by the Appellate Assistant Commissioner, thereafter, by the Income-tax Appellate Tribunal and by the High Court on a reference under Section 66(1) of the Income-tax Act. In the meanwhile, on May 13, 1955, the Income-tax Officer issued a notice under Section 34 to the assessee for the assessment year 1949-50, proposing to reopen the assessment and to assess the amount of Rs. 87,937 in the original assessment as the amount paid to Ratiram Tansukhrai. The assessee filed a fresh return which did not include the amount paid to Ratiram Tansukhrai. The Income-tax Officer reassessed the income under Section 34(l)(a) and added Rs. 87,937 to the income returned by the assessee in the assessment year 1949-50. The Appellate Assistant Commissioner upheld the action of the Income-tax Officer under Section 34(1)(a) and confirmed the order observing that the assessee had misled the Income-tax Officer into believing that there was a genuine arrangement with Ratiram Tansukhrai and had stated in the profit and loss account that the amount paid to Ratiram Tansukhrai was the share of the latter in the partnership, whereas no such share was payable to Ratiram Tansukhrai. The Income-tax Appellate Tribunal in further appeal held that at the time of the original assessment the assessee had produced all the relevant accounts and documents necessary for completing the assessment and the assessee was under no obligation to inform the Income-tax Officer about the true nature of the transactions. On this view, the Tribunal reversed the order of the Appellate Assistant Commissioner and directed that the amount of Rs. 87,937 be excluded from the total income of the assessee for the year 1949-50. The Tribunal declined to state the case to the High Court under Section 66(1). A petition to the High Court under Section 66(2) for directing the Tribunal to state the case was rejected by the High Court and, thereafter, an appeal was preferred by special leave to the Supreme Court. On these facts, the Supreme Court held that Section 34(1)(a) could not be invoked and Shah J., (as he then was), delivering the judgment of the Supreme Court observed at page 612 of the report--See : [1971]79ITR609(SC) :

'We are of the view that under Section 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 those facts. The terms of the Explanation to Section 34(1) also do not impose a more onerous obligation. Mere production of the books of account or other evidence from which material facts could with due diligence have been discovered does not necessarily amount to disclosure within the meaning of Section 34(b), but where on the evidence and the materials produced the Income-tax Officer could have reached aconclusion other than the one which he has reached, a proceeding under Section 34(1)(a) will not lie merely on the ground that the Income-tax Officer has raised an inference which he may later regard as erroneous.' The facts of the case before the Full Bench of the Gujarat High Court were equally startling. In Poonjabkai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) [FB] the facts were as follows : On July 1, 1944, in S.Y. 2000, the previous year relevant to the assessment year 1945-46, the karta of the assessee-Hindu undivided family entered into an agreement to sell a portion of a plot of land to N and Co., of Wadhwan. A sum of Rs. 3,05,000 was to be paid as earnest money in two instalments. The first instalment of Rs. 1,05,000 was paid on May 14, 1944, for which a receipt was passed. A further sum of Rs. 2,00,000 was paid on July 1, 1944. Out of the aggregate sum of Rs. 3,05,000 received, the assessee showed in his books of account only a sum of Rs. 78,000 by a credit entry dated three days before the close of the accounting year. Under the terms of the agreement of sale, if the purchaser failed to complete the sale on or before October 1, 1944, the vendor was to be entitled to forfeit the earnest money paid to him and time was of the essence of the contract. The purchaser did not complete the contract on the date fixed. On November 13, 1944, the assessee's pleader wrote to the purchaser that, as the purchaser had not completed the contract on the due date, the assessee had exercised the right of forfeiture and the amount of Rs. 3,05,000 stood forfeited on November 18, 1944. N, who was the sole proprietor of N and Co., replied that he was striving hard to raise the balance, that the assessee should give a further opportunity for 15 days from November 18 and that the forfeiture might stand good if the sale was not completed by then. At the time when the original assessment was completed on January 23, 1947, the agreement under which the assessee had purchased the land, the agreement to sell a portion of this to N and Co., the receipt for the payment of Rs. 1,05,000 and the correspondence between the assessee's pleader and the reply were all produced before the Income-tax Officer. No reference was made in that assessment order to the transaction of the amount of Rs. 3,05,000 but the Income-tax Officer placed among the records, a note of the same date, January 23, 1947, referring to the explanation of the assessee for crediting in the accounts an amount of Rs. 78,000 only out of the total amount of Rs. 3,05,000 and noting that the matter had not yet been finally settled between the assessee and the purchaser and that the assessee was still in possession of the land. In 1953, after the integration of the State of Wadhwan with India, at the request of the -Income-tax Officer of Ahmedabad, the Income-tax Officer of Surendranagar, who had jurisdiction over Wadhwan town, recorded the statement of N to the effect that N had given a loan of Rs. 2,00,000 which had been repaidin the middle of S.Y. 2002 and that the loan had been given from his personal fund and not from N and Co. This information was passed on to the Income-tax Officer having jurisdiction over the assessee's case. The information which was thus received from the Income-tax Officer, Surendra- nagar, was materially different from what was furnished by the assessee in 1947 at the time when the original assessment was completed and hence the Income-tax Officer, Ahmedabad, served a notice on the assessee on March 30, 1954, under Section 34(l)(a) of the Act. The assessee filed a return under protest. The statements of N and his brother-in-law, K, were recorded on commission in the absence of the assessee. The karta of the assessee-family was also examined. The Income-tax Officer then made a reassessment order of March 19, 1955, taxing the sum of Rs. 3,05,000 as income from undisclosed sources. It was under these circumstances that, after considering the entire legal position and the case law on the subject as was available till then, it was held by the Full Bench that the assessee was under no obligation to instruct the Income-tax Officer about the other inferences which it was possible for the Income-tax Officer to draw, viz., that the transaction between him and N and Co. could possibly be held to be a bogus transaction. Merely because the Income-tax Officer in 1947 raised an inference which he subsequently regarded as erroneous, the proceedings under Section 34(1)(a) could not lie. The fact that it was because of the proceedings started by the Income-tax Officer at Surendranagar that the matter came to the knowledge of the income-tax department, would not enable the Income-tax Officer to invoke the provisions of Section 34(1)(a). So far as the provisions of Section 34(1)(a) are concerned, it is the conduct of the assessee that has to be looked at and not whether the Income-tax Officer subsequently came to know some facts. It is only under Section 34(1)(a) that it would have been open to the Income-tax Officer to bring in aid the information received from the Income-tax Officer at Surendranagar for reopening the proceedings which had been completed in January, 1947.

11. The facts of the case before us are not as much glaring as the facts of the case in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) [FB] or in Parashuram Pottery Works Co. Ltd. v. Income-tax Officer : [1977]106ITR1(SC) before the Supreme Court. If, in either of these two cases, the provisions of Section 147(a) or Section 34(1)(a) could not be invoked, we fail to see how on the facts of the case before us, they can be invoked against the assessee. The assessee had given his explanation, viz., that the amount of Rs. 20,000 in each of the years under consideration had been utilised by the vice-president at his discretion for pacifying the troublesome elements among the workmen of the company. It was open to the Income-tax Officer either to reject or accept that explanation at the time of the original assessment in respect of each of the two years. The primary facts from which the inference could be drawn were all stated by the assessee. It was for the Income-tax Officer to draw the appropriate inference and the fact that he drew the inference in favour of the assessee in respect of the assessment years 1965-66 and 1966-67, does not mean that the assessee was at fault or that the conduct of the assessee was open to challenge in proceedings under Section 147(a). The conduct of the assessee has not to be looked at except for finding out whether all the primary facts, which the assessee was bound to disclose, were disclosed or not. It was not for the assessee to point out any possible inference other than the one which he was contending for at the time of the original assessment and since the Income-tax Officer drew an inference which was subsequently regarded as erroneous and that is obviously the case, as pointed out from the counter-affidavit filed in each of the two cases, it necessarily follows that the provisions of Section 147(a) cannot be invoked against the assessee in the instant case.

12. In view of the legal position which clearly emerges from these several decisions of the Supreme Court, it is not necessary for us to refer to the decisions of other High Courts on which Mr. P. Rama Rao, the learned standing counsel for the income-tax department, relied before us. He relied upon the decisions.of the Andhra Pradesh High Court in Anne Nagendram & Bomma Reddi Venkayya & Co. v. Commissioner of Income-tax : [1967]66ITR46(AP) of the Madras High Court in M. Varadarajulu v. Income-tax Officer : [1974]97ITR476(Mad) of the Full Bench of the Calcutta High Court in Smt. Nirmala Birla v. Wealth-tax Officer : [1976]105ITR483(Cal) and of the Kerala High Court in Sujir Ganesh Nayak & Co. v. Income-tax Officer : [1976]104ITR524(Ker) . Since the legal position, as summarised by the Full Bench of the Gujarat High Court in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax : [1974]95ITR251(Guj) is the same as in the latest decision of the Supreme Court in Parashuram Pottery Works Co. Ltd. v. Income-tax Officer : [1977]106ITR1(SC) , it is not necessary for us to refer to these different decisions of the different High Courts. Again, the two decisions of the Supreme Court on which Mr. Rama Rao relied, viz., S. Narayanappa v. Commissioner of Income-tax : [1967]63ITR219(SC) and Kantamani Venkata Narayana and Sons v. Income-tax Officer : [1967]63ITR638(SC) were, in one form or other, except the decision in Malegaon Electricity Co. (P.) Ltd. v. Commissioner of Income-tax : [1970]78ITR466(SC) , considered by the Full Bench of the Gujarat High Court and since the legal position summarised by the Full Bench of the Gujarat High Court is on the same lines as the legal position which was accepted by the Supreme Court in Parashuram Pottery Works Co. Ltd. v. Income-tax Officer : [1977]106ITR1(SC) , there is no need to refer to these decisions of the SupremeCourt.

13. In view of our conclusions as stated above, we hold in favour of theassessee and against the income-tax department on the issue of the jurisdiction of the Income-tax Officer to issue a notice under Section 147(a). We,therefore, hold that Writ Petition No. 2557 of 1974 was rightly allowed byour learned brother, Raghuvir J. Writ Appeal No. 410 of 1976, therefore,fails and is dismissed. W.P. No. 1541 of 1976 is, therefore, allowed andthe impugned notice dated February 17, 1975, to reopen the assessment forthe assessment year 1966-67 is quashed and set aside. The respondentsare restrained from giving effect to the notices under Section 147(a) ineither of these two cases.

14. The respondent, i.e., the Income-tax Officer concerned, will pay the costs of the assessee-company in each of these two matters.


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