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S. Rajanna and Another Vs. First Income-tax Officer, Circle I, Salem. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petitions Nos. 2070 and 2074 of 1968
Reported in[1972]83ITR251(Mad)
AppellantS. Rajanna and Another
RespondentFirst Income-tax Officer, Circle I, Salem.
Cases ReferredBaladin Ram v. Commissioner of Income
Excerpt:
- .....sums of rs. 10,000 each to be their income, have not specifically stated as to when and in what year the income was earned though it is a matter exclusively within their knowledge. the petitioners contention that the income-tax officer had no jurisdiction to initiate reassessment proceedings in the petitioners cases for the assessment year 1961-62 under section 147 of the act does not appear to be correct. in these cases the assessability of the sum of rs. 10,000 in the case of each of the petitioners is not in dispute in view of the fact that the petitioners have themselves admitted during the proceedings for the assessment year 1962-63 that the borrowing of rs. 10,000 on april 12, 1961, shown in the return of income was untrue and that the same may be treated as income from.....
Judgment:

The judgment of the court was delivered by

RAMANUJAM J. - As the point involved in both the writ petitions is the same, they are dealt with together.

In both the above petitions the petitioners seek a writ of prohibition or any other appropriate writ prohibiting the First Income-tax Officer, Circle I, Salem, from proceeding with the reassessment proceedings for the assessment year 1961-62 initiated by him in pursuance of the notices dated April 25, 1968, issued under section 148 of the Income-tax Act. Each of the petitioners filed his return of income for the assessment year 1961-62, that is, for the previous year ended April 12, 1961, and the said return of income was accompanied by statement of creditors which included the borrowal of Rs. 10,000 from Seth Vasumul Lalchand, Madras, and also a claim of Rs. 305 towards the interest payment said to have been made to the said banker on the said borrowing of Rs. 10,000. The Income-tax Officer completed the assessment in each of these cases for the assessment year 1961-62 on November 28, 1962, accepting the income returned by the petitioners. Later, for the assessment year 1962-63, that is, for the previous year ended on April 13, 1962, each of the petitioners again showed a borrowing of another sum of Rs. 10,000 from the same banker. The Income-tax Officer, however, treated the said sum of Rs. 10,000 as also the borrowal of Rs. 10,000 shown in the earlier year as the petitioners income from undisclosed sources, as the petitioners had admitted that the borrowals were not genuine. Thus, the Income-tax Officer treated a sum of Rs. 20,000 as the petitioners income from undisclosed sources and assessed each of the petitioners on that basis. The petitioners filed appeals to the Appellate Assistant Commissioner of Income-tax, Salem, who by his order dated June 23, 1967, deleted the sum of Rs. 10,000 from the petitioners total income on the ground that the entry relating to the borrowal of Rs. 10,000 was made by the petitioners during the year ended April 12, 1961, and that, therefore, the borrowal could not be brought to tax in the assessment year 1962-63. Thereafter, the matter was taken to the Tribunal by the revenue, questioning the view taken by the Appellate Assistant Commissioner. The Income-tax Officer also issued a notice dated April 25, 1968, to each of the petitioners under section 148 of the Income-tax Act proposing to reopen the original assessment for the year 1961-62 after sanction by the Commissioner of Income-tax. The notices under section 148 of the Income-tax Act are impugned in these writ petitions.

Though various contentions have been raised in the affidavit of the petitioners, the only contention that was urged before us was that the Income-tax Officer had no jurisdiction to bring to charge the said sum of Rs. 10,000 in the assessment year 1961-62, that is, for the year ended on April 12, 1961. According to the petitioners their borrowal of Rs. 10,000 was shown on April 12, 1961, that is after March 31, 1961, that under the provisions of the Indian Income-tax Act, 1922, for income from undisclosed sources, the previous year is the financial year ended 31st March, that since the petitioners borrowal was on April 12, 1961, the same, even if it is treated as an income from undisclosed sources, cannot be considered for the assessment year 1961-62 in view of the decision in commissioner of Income-tax v. P. Darolia & Sons and, therefore, the Income-tax Officer had no jurisdiction to initiate proceedings against the petitioners for the assessment year 1961-62 under section 147 of the Act.

In these cases the Tribunal has already held that the sum of Rs. 10,000 can properly be brought to tax as income accrued in the assessment year 1962-63. But the petitioners have sought reference to this court against the orders of the Tribunal. Thus the petitioners have taken up the stand that the addition of Rs. 10,000 each in the assessments for 1962-63 was not correct. It is only because of the stand taken by the petitioners that the said sum of Rs. 10,000 cannot be brought to charge in the assessment year 1962-63 that the Income-tax Officer has proceeded to reopen the original assessments by way of protective assessments in respect of the said sum of Rs. 10,000.

In both the cases the original assessments for 1961-62 were completed by the Income-tax Officer on November 28, 1962, tacitly accepted the statements of the creditors that the hundi loans furnished by the two assessees are correct. Subsequently, in connection with their respective assessments for 1962-63, the petitioners by their letters dated May 22, 1965, referred to certain hundi transactions for the assessment years 1961-62 to 1964-65 and agreed that the credit of Rs. 10,000 for the years 1961-62 and a further credit of Rs. 10,000 for the assessment year 1962-63 may be added and assessed as their respective taxable income. Presumably, they came forward with this voluntary disclosure to avoid penalty. On the basis of the aforesaid disclosure made by the petitioners, the Income-tax Officer completed the assessment for 1962-63 in both the cases adding Rs. 10,000 in each assessment as income from undisclosed sources. The petitioner, however, successfully urged before the Appellate Assistant Commissioner that the Sum of Rs. 10,000 added as income from undisclosed sources cannot be assessed in the assessment year 1962-63. Therefore, the Income-tax Officer felt that credit of Rs. 20,000 disclosed by the assesses was a non-genuine borrowing for the year ended April 12, 1961, relevant to the assessment year 1961-62, and proposed to reopen the assessment for the year 1961-62 after getting the sanction of the Commissioner. As against the appeals filed against the orders of the Appellate Assistant Commissioners the Tribunal had found that the Addition of Rs. 10,000 each in the assessments of the petitioners for 1962-63 were really based on the admissions by the assessees that the cash credit of Rs. 10,000 each were their taxable income. Though the Tribunal has given its decision that the undisclosed income of Rs. 10,000 each has been rightly brought to tax for the assessment year 1962-63 the petitioners are taking up the stand that the said income of Rs. 10,000 each cannot be brought to charge in the assessment year 1962-63. The Income-tax Officer has to naturally make a protective assessment with a view to see that the said sums of Rs. 10,000 each do not escape assessment. Therefore, the Income-tax Officer has initiated reassessment proceedings for the assessment year 1961-62 by issuing notices under section 148 of the Income-tax Act. What each of the petitioners contends is that the Income-tax Officer had no jurisdiction to initiate reassessment proceedings for the assessment year 1961-62 in respect of the sum of Rs. 10,000. The petitioners themselves have admitted before the Income-tax Officer that the borrowals of Rs. 10,000 each entered on April 12, 1961, were not genuine and that they may be treated as taxable income and brought to tax. Therefore, the only question is as to whether the said undisclosed incomes are to be assessed in the year 1962-63 or in the earlier years.

The Income-tax Officer originally proceeded to assess the sum during the assessment year 1962-63, for the disclosures were made only in that year. The petitioners, though they admitted the sums of Rs. 10,000 each to be their income, have not specifically stated as to when and in what year the income was earned though it is a matter exclusively within their knowledge. The petitioners contention that the Income-tax Officer had no jurisdiction to initiate reassessment proceedings in the petitioners cases for the assessment year 1961-62 under section 147 of the Act does not appear to be correct. In these cases the assessability of the sum of Rs. 10,000 in the case of each of the petitioners is not in dispute in view of the fact that the petitioners have themselves admitted during the proceedings for the assessment year 1962-63 that the borrowing of Rs. 10,000 on April 12, 1961, shown in the return of income was untrue and that the same may be treated as income from undisclosed sources. Therefore, the only question that is to be considered by the Income-tax Officer is whether such income can be assessed for the assessment years 1961-62. In our view, the Income-tax Officer has jurisdiction to consider whether the sums of Rs. 10,000 each could be charged to tax in the assessment year 1961-62 and the notice issued by him under section 148 of the Income-tax Act cannot be said to be without jurisdiction as alleged by the petitioners.

On behalf of the petitioners, reference has been invited to the decision of the Supreme Court in Calcutta discount Co. Ltd. v. Income-tax Officer in support of their contention that where the action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Court should issue appropriate orders or direction to prevent such consequences and that the existence of an alternative remedy is not, however, always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. But, as pointed out by their lordships of the Supreme Court in that case, if there were in fact some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, it would have a material bearing on the question of under-assessment and that would be sufficient to give jurisdiction to the Income-tax Officer to issue a notice under section 148 and whether those grounds were adequate or not for arriving at a conclusion that there was a non-disclosure of certain material facts would not be open for the courts investigation. The petitioners who want the court to hold that the Income-tax Officer has no jurisdiction in invoke section 147 have to establish that the Income-tax Officer had no material at all before him for believing that there was no non-disclosure of certain material facts. In these cases the petitioners have admitted that there has been non-disclosure of the income chargeable to tax. The petitioners have also not disclosed as to when and in what year that income had accrued. It cannot, therefore, be said that the Income-tax. The petitioners have also not disclosed as to when and in what year that income had accrued. It cannot, therefore, be said that the Income-tax Officer had no jurisdiction to proceed under section 147 read with section 148 for the purpose of bringing to tax the two sums of Rs. 10,000 each admitted to be their income. The question whether the income admitted by the petitioners are to be assessed in a particular year is exclusively within the province of the Income-tax Officer and it is not open to the petitioners to ask this court to decide as to which year the income could be related and taxed as such. Once the taxability of the income is not in dispute the assessing officer has jurisdiction to find out in which year it is to be brought to tax. The petitioners can put forward all their objections as to the assessability of the said income in a particular year and the Income-tax Officer will have to naturally consider such objections.

The learned counsel for the petitioners refers to the decision of the Supreme Court in Baladin Ram v. Commissioner of Income-tax, in support of his contention that the sums of Rs. 10,000 each cannot be brought to charge during the year 1961-62. But, as we have already expressed the view that this is a matter for the Income-tax Officer to decide at the first instance, the petitioners submissions as to the year during which the said amounts can be charged to tax have to be made before the Income-tax Officer.

In the result both the writ petitions are dismissed with costs, one set, Counsels fee Rs. 250.


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