1. This is a reference under Sub-section (2) of Section 66 of the Patiala Income-tax Act, 2001 (No. 8 of 2001), hereinafter referred to as the Act, by the Commissioner of Income-tax. Patiala (who under the Act, discharges the same functions as the Income-tax Appellate Tribunal under the Indian Income-tax Act. 1922), at the instance of the assessee, S. S. Atwal, legal representative, for and on behalf of the late Sardar Buta Singh.
2. The reference arose out of the appellate order dated the 2lst of August 1961 of the Commissioner of Income-tax Patiala, made under Section 31 of the Act. That order forms Annexure 'F' to the statement of the case and it was in turn passed in an appeal by the assessee, Sardar Buta Singh, from the order of the Appellate Assistant Commissioner of Income-tax, dated the 12th of August 1959, which forms Annexure 'E' to the statement of the case. The assessment out of which these orders arose was made by the Income-tax Officer, Hoshiarpur, in respect of the assessment year Samvat 2005 (1948-49) and the order, which forms Annexure 'D' to the statement or the case, is dated the 14th of February 1958.
3. It appears from that order that it had come to the notice of the predecessor of the Income-tax Officer that the assessee had purchased agricultural lands worth Rs. 475,000 in Kot Puran Singh, Tehsil Phagwara, District Kapurthala, in May 1947 and that the source of the investment was not disclosed. Proceedings under Section 34 of the Act were, therefore, started with the previous approval of the Commissioner of Income-tax Simla, and the original assessment as made by the order of the Income-tax Officer, Kapurthala (Annexure 'C' to the statement of the case), was revised. It was held that the unexplained investments amounted to Rs. 297,689 and demand notice was issued as well as penalty was levied under Section 28 (3) read with Section 28 (1) (c) and Section 28 (1) (a) of the Act.
4. After stating the facts in the statement of the case, the Commissioner of Income-tax concluded as follows: --
'On these facts I refer the following questions of law which arise out of the Commissioner's order under Section 32 for the opinion of their Lordships of the High Court:--
(i) Whether on the facts and in the circumstances of the case action under Section 34 was validly taken?
(ii) Whether on the facts and in the circumstances of the case the service of the notice under Section 34 was properly made by affixture?
(iii) Whether on the facts and in the circumstances of the case assessment made under Section 34 was barred by time?'
5. Now, so far as question (ii) is concerned, the latest decision of the Supreme Court (to await which the Bench had adjourned the case on the 3rd of May 1966) is Commissioner of Income-tax, Punjab, Jammu and Kashmir and Himachal Pradesh v. Daulat Ram Khanna, Civil Appeal No. 580 of 1966, D/-29-3-1967 : : 65ITR603(SC) . The learned counsel for the assessee has conceded that on account of the principles laid down by their Lordships of the Supreme Court in this case, this point no longer survives
6. As regards question (iii), Mr. D. N. Awasthy has pointed out that this is also covered against the assessee by the judgment of the Supreme Court in First Additional Income-tax Officer, Mysore v. H. N. S. Iyengar : 44ITR437(SC) , and this matter has also been conceded by the learned counsel for the assessee.
7. The only point on which arguments have been advanced before us is that when the Income-tax Officer, Hoshiarpur, proceeded to revise the assessment under Section 34, he did not have any of the 'primary facts' before him beyond those which the assessee had already produced at the time of the original assessment. With reference to Section 34 (1) of the Act (which in relevant respects is pari materia with Section 34 (1) (a) of the Indian Income-tax Act, 1922 (No. 11 of 1922)), it is pointed out that jurisdiction of the Income-tax Officer to reopen the assessment arises only if-
(a) an assessee has omitted or failed to make a return of his income for any year; or
(b) he has not disclosed fully and truly all material facts necessary for his assessment for that year, by reason of which income, profits or gains chargeable to income-tax have escaped assessment for that year. Now, the first eventuality does not arise in this case, because the return of income had already been furnished by the assessee for the assessment year in question, on the basis of which the original assessment was made. But it is contended that the assesses had even at that time made full disclosure of all material facts necessary for the assessment for that year, and in this connection reference is made to the interpretation of Section 34 (1) (a) of the Income-tax Act. 1922, as contained in the leading case of Calcutta Discount Co., Ltd. v. Income-tax Officer, Companies District I, Calcutta : 41ITR191(SC) . Their Lordships of the Supreme Court held that the duty of the assessee was to disclose all 'primary facts' and he was not expected to discharge the functions of the Income-tax Officer in drawing proper legal inferences from the primary facts and the further facts inferred by the Income-tax Officer from the 'primary facts'. It was contended by the learned counsel for the assessee that the Income-tax Officer, while making the order (Annexure 'D' to the statement of the case), did not have before him 'any primary facts' beyond those which were already disclosed by the assessee when he submitted his return, on the basis of which the order of assessment (Annexure 'C' to the statement of the case) was made, and while making the second order the Income-tax Officer was merely changing his view on the same facts. This, it was maintained, was not open to him while exercising the limited jurisdiction under Section 34, and in that sense the order (Annexure 'I' to the statement of the case) was without jurisdiction and therefore illegal.
8. To this argument the reply by Mr. Awasthy is simple. He maintained that the objection which is pressed before this Court does not arise from the statement of the case and hence it could not be gone into by this Court. No doubt (i) in paragraph 10 of the statement of the case is rather widely worded, but according to Mr. Awasthy's submission it must be related to the facts as stated in the contentions raised by the assessee before the Commissioner and the facts as stated in the statement of the case. In para 6 of the statement of the case it is stated that in appeal before the Commissioner against the order of the Appellate Assistant Commissioner the following contentions were made before the Commissioner:--
(i) Computing the time from the end of the accounting period the time-limit of eight years for completing the assessment had already expired,
(ii) The service of notice by affixture being covered by Rule 20 of Order 5 of the Civil Procedure Code, a copy of notice under Section 34 should have been affixed on the notice-board of the Court Room, a shortcoming which invalidated the service in this case;
(iii) The appellant resided at his farm Kot Puran Singh and his brother was living in Buta Singh Building at Phagwara. The notice under Section 34 should have, therefore, been served at the farm-house and not at Phagwara house.
Mr. Awasthy submitted that the questions for the advisory opinion of this Court in para 10 of the statement of the case must necessarily be related to the facts as mentioned in this statement of the case and the contentions raised by the assessee before the Commissioner of Income-tax. Now, coordinating para 6 with para 10, it is obvious that on (i) in para 6 the question based is (iii) in para 10, and on the basis of (ii) in para 6 the question referred to this Court is (ii) in para 10. Therefore, it would follow that the question referred in (i) in para 10 must be based on the remaining contention, which is (iii) in para 6. Thus, the only matter that would arise on the question of law at (i) would be whether the notice under Section 34 should have been served at the farm-house of the assessee in Kot Puran Singh and not at the Phagwara house. This contention was repelled by the Commissioner of Income-tax in para 6 of his order (Annexure 'F' to the statement of the case) on the basis of the facts of the case and the learned counsel for the assessee has very rightly not canvassed it before us.
9. The facts and circumstances of the case, in the light of which decision has to be arrived at on question of law (i) must necessarily be facts and circumstances adverted to in the statement of the case and there is nothing in the statement of the case bearing on the question whether the conditions precedent for the exercise of jurisdiction under Section 34 (1) were satisfied by the Income-tax Officer when he chose to reopen the assessment in this case.
10. Our conclusion, therefore, is that Mr. Awasthy's objection is well sustained, and the only objection which has been pressed before us by the learned counsel for the assesses does not arise from the statement of the case. It may be that the question of law at (i) in para 10 of the statement of the case is too widely worded, but in such a case it is open to the High Court to refuse to express its advisory opinion. In this connection, Commissioner of Income-tax, Madras v. Sevugan : 16ITR59(Mad) , which was approved by their Lordships of the Supreme Court in Commissioner of Income-tax, Madras v. Arunachalam Chettiar : 23ITR180(SC) , may be referred to. In this connection the learned counsel for the assessee referred to Bhanji Bagawandas v. Commissioner of Income-tax, Madras : 67ITR18(SC) , in which appears the observation of the Supreme Court that all that Section 66 (1) of the Income-tax Act requires is that the question of law which is referred to the High Court and which the High Court is to decide must be the question which was in issue before the Tribunal, and when the question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal and it would be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of Section 66 (1). This principle is, however, not applicable to the facts of the present case, because, as already stated, the matter as to the conditions precedent for the exercise of jurisdiction under Section 34 (1) was neither before the Commissioner of Income-tax in his order (Annexure 'F' to the statement of the case), nor is any fact bearing on this matter even mentioned in the statement of the case. In tact, as would appear from the order (Annexure 'F' to the statement of the case) and also from the order of the Appellate Assistant Commissioner (Annexure 'E' to the statement of the case) it was not raised on behalf of the assessee at either of these stages. It was submitted by the learned counsel that he had made it one of the grounds of appeal when he went in appeal to the Appellate Assistant Commissioner of Income-tax, but the grounds of appeal are not included in the paper-book and we cannot, therefore, take any notice of that ground.
11. Mr. Awasthy has quite frankly conceded that inasmuch as the Appellate Asst. Commissioner of Income-tax by his order (Annexure 'E' to the statement of the case) had set aside the assessment with the observation that the Income-tax Officer was to complete the same according to law as from the return stage and after investigating the various contentions of the appellant, it is still open to the assessee to raise before the Income-tax Officer the question as to the existence of the conditions precedent for the exercise of jurisdiction under Section 34 (1).
12. Our answers to the questions of law are, therefore, as follows:--
(i) in the affirmative in the sense that there was no defect in the service of the notice on the assessee;
(ii) In the affirmative; and
(iii) In the negative.
13. The parties will bear their own costs in the reference.
D.K. Mahajan, J.
14. I agree.
P.D. Hafma, J.
15. I agree.