S.S. Chanda, J.
1. This petition under art. 226 of the Constitution of India seeks the quashing of the notices issued under s. 147/148 of the L.T. Act, 1961, calling upon the petitioners to submit returns for reassessment of the escaped and under assessed income for the assessment years 1955-56, 1956-57 and 1957-58.
2. The facts are these: In or about the year 1875, the great grandfather of the petitioners Munshi Tulsi Dhar, who was at that time practicing as a pleader in Meerut courts and had his residence both as Delhi and meerut, purchased a portion of agricultural land near village Mauza Malikpur Chhaoni on Karnal Road, Delhi. Another portion of the agricultural land near the said village was purchased by Shri Girdhari lal, another practicing lawyer, in or about the year 1908. After the death of Munshi Tulsi Dhar, the said lands owned by him were inherited by his sons, Shri Salig Ram, Shri Raghbar Dayal and Shri Pannu Lal. Thereafter, upon partition of the family property between the three brothers, Shri Salig Ram, received a portion of the said agricultural lands in Mauza Malikpur Chaoni as his share in the property inherited from his father and continued to use the lands for agricultural purposes. After the death of Shri Salig Ram, his portion of the said agricultural land developed upon his four sons, namely, S/Shri Suraj Narain, Chand Narain, Radhika Narain and Kripa Narain, who continued to hold the same. In the year 1949, the owners of the said lands desired to sell off the same and M/s. Delhi Land & Finance Ltd., a limited joint stock company having its registered office at 'F' Block, Connaught Place, new Delhi (for short D.L.F.) offered to act as agents for selling the same. An agreement for this purpose appointing D.L.F. as agents to sell the lands was entered into with D.L.F. of the one part and S/Shri Suraj Narain, Chand narain, Radhika Narain, Kripa narain, Lala Shri Narain, Lal Rangi Lal, Lala Jagan Nath, Lala Murli Dhar and lala Reghbar Dayal of the other part, under which the agricultural lands in Mauza Malikpur Chhaoni inherited by Shri Suraj Narain as well as the lands of the other owners were to be sold by D.L.F. According to the terms of the said agreement, Shri Suraj Narain and after his death received payment from D.L.F. against the sale proceeds of the said lands. Details of payments received by Shri Suraj Narain and after his death by the petitioners, who are sons of late Shri Suraj Narain are detailed in the statement annexed with the writ petition. A sum of Rs. 2,426-8-0 was receive in the assessment year 1955-56, Rs. 2,449 in the assessment year 1956-57 and Rs. 14,425-1-3 in the assessment year 1957-58.
3. For the assessment year 1953-54, the previous year being the year ending March 31, 1953, Shri Suraj Narain received a sum of Rs. 28,828-11-9. Shri Suraj Narain filed a return of his total income and in the statement accompanying the return a note was made to the effect that he had also owned lands and garden in Mauza Malikpur as inherited as an ancestral property. But those were agricultural lands and garden and they were not taxable. It was also mentioned that some of those lands had been sold during the year. A certificate received from D.L.F. regarding the payment of Rs. 28,828-11-9 received during the previous year was submitted. A copy of the agreement dated July 22, 1949, was also submitted. The ITO who was then dealing with the case issued a notice under s. 23(3) of the Indian I.T. Act, 1922, dated July 29, 1953, regarding the sale of lands. In a written reply dated August 5, 1953, Shri Suraj Narain disclosed that the lands were agricultural lands and he had 1/16th share in the village. It was also stated that there was never any purchase or sale of any property and that the lands have been sold as the landowner and not as a dealer in lands. It was further stated that lands were purchased by his grandfather as an investment, and as something which in itself was considered to give a pride of possession to the owner and that the assessed was merely realizing his share of investment. Reference was made to the ratio in several decided cases that a person who purchases a property himself and sells it later on, is entitled to say that his intention at the time of purchase was investment and not trade. The ITO in his order dated August 26, 1953, recorded the following finding:
'During the account year the assessed sold some of his ancestral agricultural land in Mauza Milkpur Chhaoni near Azadpur, Delhi, for which he received Rs. 28,828 on account of part payment. It is stated that the sale of this land has been entrusted to M/s. D.L.F. & Co. Ltd. New Delhi, which paid the assessed Rs. 28,828 during the count year on account. In his letter dated 5-8-53, filed in response to notice under section 23(3), the assessed has narrated the history of this land to show that this land is ancestral. assessed states that, so far as he remembers, his grandfather purchased this land some time during 1875-80. The assessed holds 1/6th share in it. The land has so far been put to agricultural use. He further states that all his life he has been practicing as Barrister-at-Law and was a Government servants working as Government Pleader and public prosecutor in the Delhi Province and that he has never done any kind of real estate business as he was not allowed to indulge in such activity when he was Government servant nor being entitled to do so as a Bar-at-Law. He points out that he merely converted his possession into cash which cannot amount to any business activity.'
4. Allegations have been made in the writ petition that for the assessment years, 1955-56, 1956-57 and 1957-58, similar returns were filed along with the certificate of payment received from D.L.F. and the copies of the agreement with D.L.F. A note was also put in the returns in the same words the original assessment by not including the amount received by the assessed towards the sale of lands. The ITO in his order of assessment accepted the claim made by the assessed in his returns and framed the assessments accordingly by treating the payment received from the sale of lands as converted the possession into cash not amounting to business activity. By the impugned notices, the ITO called upon the petitioners to submit fresh returns for reassessment for the escaped and under assessed income for the assessment years. These notices have been issued under s. 147148 of the I.T. Act, 1961.
5. A similar notice was issued for the assessment year 1954-55. The assessed had similar filed the return of the income. It included in the statement of the total income accompanying the return sum of Rs. 8,602 received by the assessed from D.L.F. The ITO by his order dated September 24, 1954, did not include this amount in the assessable income. Shri Bishan narain, one of the petitioners, received on April 3, 1963, a notice for reassessment for the year 1954-55, issued ss. 147 and 148 of the I.T. Act, 1961, by the ITO on March 28, 1963, in the name of M/s. Delhi Land & Finance Ltd. Shri Suraj Narain, Shri Sri Narain, Shri Raghbar Dayal and others, 'F' Block, Connaught Place, New Delhi. The notice is identical with the impugned notices except the year of assessment and the date of issue. The petitioners filed a writ petition under arts. 226 and 227 of the Constitution of India in this court praying for the issue of writ or direction in the nature of certirari and/or calling for the records in the case and quashing the notice and a writ order or direction in the nature of madam us and/or prohibition and/or otherwise directing the respondents not to make any assessment in pursuance of the notice. That writ petition was dismissed in limit by the Circuit Bench of the Punjab High Court on May 24, 1963. An appeal was preferred by special leave from the judgment and order dated May 24, 1963, in the Supreme court. The Supreme Court, after recording the facts of the case and considering the material on the record, came to the conclusion that the order of the High Court ought to be set aside and the petition with according to law. The writ petition after issued and the petition admission came up for hearing before B. C. Misra J. (as he then was) and was allowed by the judgment dated April 18, 1974 [Ravindra Narain v. ITO : 96ITR612(Delhi) ].
6. Conditions precedent to the exercise of jurisdiction must exist before the issue of a notice under s. 147/148 of the I.T. Act, 1961. The first condition precedent is that ITO must have reasons to believe suggesting that the ITO acts as a reasonable and prudent man on the basis of the information secured by him that it is a case of reopening. The second condition is that the reason believe must be of the omission or failure on the part of the assessed to make a return of his income and to disclose fully and truly all material facts necessary for his assessment. It is the admitted case that the return of the income in the prescribed form and verified the prescribed manner has been filed for all the three assessment years, namely, 1955-56, 1956-57 and 1957-58. The challenge in this case is not as to the formation of the opinion or the recording of the reasons. The only question is whether the assessed has omitted or failed to disclose fully and truly all material facts. The duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessed. The law is settled by the Supreme Court in various decisions including Calcutta Discount co. Ltd. v. ITO : 41ITR191(SC) , that in every assessment proceeding the assessing authority would for the purpose of computing or determining the proper tax due from an assessed, require to know all the facts which would help him in coming to correct conclusion. From the primary facts in his possession, whether on disclosure by the assessed, or discovered by the assessing authority on the basis of the facts disclosed or otherwise, the assessing authority has to draw inference as regards certain other facts and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inference on facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else, far less the assessed to tell the assessing authority what inferences, whether on facts or in law, should be drawn.
7. As noticed earlier, the assessed had clearly disclosed in the statement of total income accompanying the return that he had owned lands and garden in Mauza Malikpur as inherited as an ancestral property and some of those lands have been sold during the relevant year. The assessed had also filed a certificate of payments received from D.L.F. during the previous year relevant to each assessment year. The ITO had for the earlier assessment year called for the information. However, for these assessment years the copies of the assessment orders are not on the record but the allegation in the writ petition which is non-transversed, is that the information was duly furnished and the ITO in his order of assessment accepted the claim and framed the assessment by not including the payment received from the sale of the land during the previous year, relevant for each assessment year. The ITO had before him return of the income filed, the statement disclosing that some of the agricultural lands in Mauza Mlikpur inherited by the assessed had been sold during the previous year and the certificate of payment received from D.L.F. during the previous year, relevant for each assessment year. The assessed has the duty to make a true disclosure of facts and this has been discharged in these cases. The assessed did not disclose to milead the assessing authority. If the assessing authority fails to draw a correct inference from the primary facts disclosed, then the assessed is not responsible, for the assessed is under no obligation to advise the ITO to draw the correct inference. A distinction has to be drawn between the failure to disclose true and correct material fact by the assessed and the erroneous inference which the ITO may draw from material facts which are otherwise full and true. The present is a latter type of case in which there assessment is not permissible as the same would amount to a change of opinion or setting an opinion.
8. According to the counsel for the respondents, the impugned notices have been issued to an association of person then existing during the relevant assessment years and that association had not filed any return and, thereforee, for this reason, the notices issued are perfectly legal and valid. A similar argument was advanced by the department before the Supreme Court in the case relating to the assessment year 1954-55. That notice was identical with the impugned notices in this writ petition. The Supreme Court observed:
'We have reproduced one notice above and we cannot find anything in that notice to come to the conclusion that the Income-tax Officer was really attempting to asses an association of persons.'
9. The impugned notices are not directed against any association of persons alleged to have been formed by the petitioners. They are addressed to the individuals. Assuming for the sale of argument that an association of persons existed, even then the ITO exercised his option to assessed the individuals. Again, it is not permissible as the same would amount to change of opinion of setting an opinion.
10. I have chosen to record reason as each assessment year has to be taken as a separate and distinct proceeding. My view is the same as that held by B. C. Misra L. for the assessment year 1954-55.
11. For the above reasons, the writ petition succeeds and is allowed. The impugned notices are quashed as also subsequent proceedings in pursuance thereof on the facts and circumstances of the case. I make no order as to costs.