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income-tax Officer, Alleppey Vs. S. Veeriah Reddiar. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberWrit Appeal No. 3 of 1963
Reported in[1966]62ITR248(Ker)
Appellantincome-tax Officer, Alleppey
RespondentS. Veeriah Reddiar.
Cases ReferredCalcutta Discount Co. Ltd. v. Income
Excerpt:
.....any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the act, or excessive loss o ' it is agreed that there has been no omission or failure on the part of the assessee to make a return of his income under section 22. the reason for the notice, as stated in the opening paragraph of exhibit p-1, reads as follows :whereas i have reason to believe that your income assessable to income-tax for the assessment year 1952-53 has; he should also have had reason to believe that the escape or under-assessment was by reason of the omission or..........any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the act, or excessive loss or depreciation allowance has been computed.'it is agreed that there has been no omission or failure on the part of the assessee to make a return of his income under section 22. the reason for the notice, as stated in the opening paragraph of exhibit p-1, reads as follows :'whereas i have reason to believe that your income assessable to income-tax for the assessment year 1952-53 has;(a) escaped assessment,(b) been under-assessed,i therefore propose to.....
Judgment:

M. S. MENON, C.J. - This is an appeal by the Income-tax Officer, Alleppey, against the decision in Veeriah Reddiar v. Income-tax Officer. That decision quashed exhibit P-1 dated 27th March, 1961, a notice issued to the respondent before us under section 34 of the Indian Income-tax Act, 1922, in respect of the assessment year 1952-53.

The notice was issued after four years and before eight years from the end of that assessment year, and it is common ground that the conditions to be satisfied are those embodied in clause (a) of sub-section (1) of section 34. Under that provision a notice can be served on the assessee only 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 of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed.'

It is agreed that there has been no omission or failure on the part of the assessee to make a return of his income under section 22. The reason for the notice, as stated in the opening paragraph of exhibit P-1, reads as follows :

'Whereas I have reason to believe that your income assessable to income-tax for the assessment year 1952-53 has;

(a) escaped assessment,

(b) been under-assessed,

I therefore propose to reassess the said income that has;

(a) escaped assessment,

(b) been under-assessed.'

In order to sustain exhibit P-1, it is not enough if the Income-tax Officer had reason to believe that the income chargeable to income-tax in the assessment year 1952-53 had escaped assessment for that year or had been under-assessed. He should also have had reason to believe that the escape or under-assessment was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year.

The curious thing in this case is that neither in the first affidavit dated 5th July, 1961, nor in the second affidavit dated 18th July, 1962. which was permitted to be filed by the court after the hearing of the case had begun, is there an averment to the effect that the Income-tax Officer had reason to believe that any income had escaped assessment or had been under-assessed by reason of any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for such assessment. The judgment under appeal said :

'So far as the present case before me is concerned, the two conditions that will have to be satisfied according to the principles laid down by the Supreme Court will be (a) that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to income-tax has escaped assessment or have been under-assessed, and (b) that he must have also reason to believe that such under-assessment of the income has occurred by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the particular year'.

and held that neither of the two affidavits is sufficient for sustaining the notice impugned by the respondent.

We have been taken through the two affidavits and have reached the same conclusion. The decision of the Supreme Court mentioned by the learned judge is Calcutta Discount Co. Ltd. v. Income-tax Officer. In that case Das Gupta J. dealt with the requisites of section 34 as follows :

'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year, two conditions have, therefore, to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such under-assessment has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years, from the end of the year in question.'

As the second of the two conditions precedent has not been satisfied in this case the writ appeal should fail and has to be dismissed. Judgment accordingly. The appellant will pay the costs of the respondent. Advocates fee Rs. 100.

In the view we have taken it is unnecessary to consider the other points dealt with in the judgment under appeal, and they are not discussed in this judgment.


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