1. In this case we are concerned with the Income-tax assessment of the petitioner Sheo Nath Singh for the years 1941-42 to 1946-47. The petitioner, according to his own petition, has at all material times been a shareholder of a number of companies engaged in the business of managing hotels and as a result of such shareholding, he became director and managing director of various companies. At one time he became the owner of a large block of shares of Spence's Hotel Ltd. and was formerly an ex-managing director, and is now incharge of the management thereof. According to the petitioner, in the year 1945-46 Rai Bahadur Oberoi purchased from him his share-holding in the Associated Hotels of India Ltd. (hereinafter referred to as the 'Associated Hotels') for a sum of Rs. 20,65,705-13-0 pies. Similarly, in 1949 another block of shares was purchased by the said Rai Bahadur Oberoi in the said company. It appears that the case of Rai Bahadur Oberoi was referred to the Income-Tax Investigation Commission, set up under the provisions of the Taxation on Income (Investigation Commission) Act, 1947. The said Commission, on or about 18th August, 1951 issued notices under Section 5(4) of the Investigation Commission Act to the petitioner in respect of the assessment years 1940-41 to 1946-47. Before the Investigation Commission, the petitioner made various statements of his net wealth on various dates and produced various books and records of all the companies in which he was a director or managing director, and in respect of which he furnished various information. In Suraj Mall Mohta and Co. v. Visva Natha Sastri, : 26ITR1(SC) and in Muthiah v. Commr. of Income Tax, Madras, : 29ITR390(SC) the Supreme Court held that Section 5(4) and Section 5(1) respectively, of the Taxation on Income (Investigation Commission) Act, 1947 became void on the commencement of the Constitution as offending against Article 14 of the Constitution. The first-mentioned decision led to the insertion of Sub-sections (1A) to (1D) in Section 34 of the Income Tax Act, 1922 (hereinafter referred to as the 'said Act'). Section 34(1A) of the said Act runs as follows :
'(1A) If, in the case of any assessee, the Income-tax Officer has reason to believe-
(i) That income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946; and
(ii) that the income, profits or gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one lakh of rupees or more; he may, notwithstanding that the period of eight years or, as the case may be, four years specified in Sub-section (1) has expired in respect thereof, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under subsection (2) of Section 22, and may proceed to assess or re-assess the income, profits or gains of the assessee for all or any of the years referred to in Clause (i), and thereupon the provisions of this Act (excepting those contained in Clauses (i) and (iii) of the proviso to Sub-section (1) and in Sub-sections (2) and (3) of this section) shall, so far as may be, apply accordingly:
Provided that the Income-tax Officer shall not issue a notice under this sub-section unless to has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice:
Provided further that no such notice shall be issued after the 31st day of March, 1956.' Later on, as a result of the decision in Shri Meenakshi Mills Ltd. v. Visvanatha Sastri, : 26ITR713(SC) , the Investigation Commission ceased to function. On the 5th of November, 1954, the Income-tax Officer, District II, Calcutta Mr. Sarkar served on the petitioner several notices under Section 34(1A) of the said Act for assessment years 1940-41 to 1946-47. By order dated 23rd of November, 1954 the Central Board of Revenue transferred the petitioner's case to the Income-tax Officer, Central Circle, XII. On the 25th of May, 1955 the petitioner, in this High Court, filed an application under Article 226 of the Constitution (Matter No. 92 of 1955) for the purpose of quashing and/or preventing the continuance of the said case. On the 6th of March, 1956 the Income-tax Officer, Central Circle XII Shri R. S. Gahlot issued a fresh set of notices under Section 34(1A) in respect of the assessment years 1940-41 to 1946-47 and proceedings under the previous notices were discontinued. Accordingly, the petitioner did not press on with the Rule in Matter No. 98 of 1955, which was discharged, but it was recorded that the petitioner did not abandon his contentions. The Income-tax Officer, Central Circle XII Shri G.P. Gupta, assessed the petitioner for the years 1942-43, 1943-44, 1944-45 and 1945-46. In these assessment orders, it is mentioned that pursuant to the notice under Section 34(1A) the petitioner had filed returns according to his original assessment. It was further stated that in the meanwhile the Income-tax Officer had received the records of the Investigation Commission, under Section 37 of the said Act. In the assessment order for 1942-43 (pages 46 to 58 of the paper book) it is mentioned that the assessee had received a sum of Rs. 22,00,000 or so, during 1944, and there was reason to believe that this sum or a part thereof had escaped assessment. It was stated that several investments in sundry companies in the names of various persons totalling sixteen, were really the assessee s transactions, although carried out in different names. They were either his employees or close relations like-father-in-law or brother-in-law etc. These persons had no ostensible sources of income during the material time and the companies were under the absolute control of the assessee. At various times, many of these shares were being transferred in the name of the assessee's wife and it is stated that there was an admission on behalf of the assessee that at various periods several shares were acquired by him in the name of these very persons. But he persisted in denying that the shares in question belonged to him and this was not believed. In spite of request, the assessee would neither produce the said persons nor even furnish their addresses. All that he said was that the Income-tax Officer was not entitled to make use of the disclosures by the petitioner under the Investigation Commission Act. It was held that the shares had been purchased out of secret Income. Similar findings were made in the years 1948-44 and 1944-45. In the assessment order of 1945-46, it was mentioned that during the year under consideration, the assessee sofa shares of Associated Hotels to Rat Bahadur Oberoi at a profit of 9 lakhs. A very interesting history was stated about the share transaction in respect of the Associated Hotels. It was held that in 1942 when the share prices of the Associated Hotels were very low, the assessee was then one of the directors of the Grand Hotel and also dealing in shares. He wanted to corner the shares and entered into partnership with Shri Oberoi, later on taking in another partner Shri Malhotra. By 1943, they had between them purchased about 84,000 shares at an average price of Rs. 10-4-0 per share. Thereafter, Shri Oberoi & the petitioner fell out and there were litigations between them. Ultimately, it was agreed between them that whoever wished to take over the management and control of the Associated Hotels should take over the shares of the other party by bidding a higher amount than the other party was prepared to bid. Under the said arrangement, Shri Oberoi took over the shares at 120% over the cost price. But this was not all. Under the agreement, Shri Oberoi agreed to take over all snares which the petitioner could sell to him, in the said company, upto a particular date, but not exceeding 12,675 shares. This, if true shows that the acquisition and sale of the shares was not in the nature of an investment only. It is stated in the assessment order that the petitioner was unable to satisfy the Income-tax Officer as to the particulars of the transactions that took place in respect of the said agreement. After taking into account the various facts relating to the acquisition and sale of the shares, the Income-tax Officer came to the conclusion that these shares were neither purchased for investment nor by way of a change of investment, but that the gain that the petitioner made, was an operational gain in course of business, under a scheme for profit making. Also it waft found that there was a huge amount of surplus cash, the source of which was not disclosed. It was held that this was nothing but secreted income, made out of undisclosed sources. Against all these assessment orders, for the years 1942-43, 1943-44 and 1945-46, the petitioner appealed to the Appellate Assistant Commissioner. Some of the grounds of appeal are interesting, because the same or similar grounds have been taken in the petition in the present case. For example, Ground No. 1 was that the Income-tax Officer had no material before him to justify the notice under Section 34(1A) of the said Act. Ground No. 3 was that the 'condition precedent' for issuing a notice under Section 34(1A), contained in the first proviso, had not been complied with, and also that Section 34(1A) was discriminatory and ultra vires. The Appellate Assistant Commissioner passed an order dated 3rd of June, 1961 copy of which is Ex. 'H' to the petition set out at pages 82 to 94 of the paper book. What the Appellate Assistant Commissioner did was to refer the matter to the Income-tax Officer, for inquiry and report on certain points, as contemplated by Section 31(2) of the said Act, which runs as follows : 'The Appellate Assistant Commissionermay, before disposing of any appeal, makesuch further inquiry as he thinks fit, or causefurther inquiry to be made by the Income-taxOfficer.'
The Appellate Assistant Commissioner has categorised the points to be inquired into, and hasheld that after receiving the remand report, theappeal will be disposed of finally. In view ofthe argument made before us, if is necessary toset out paragraphs 4 and 8 of the said order ofthe Appellate Assistant Commissioner:--
'4. It is noticed from the records that besides the alleged receipt of Rs. 22,00,000 the I. T. O. had reason to believe that the appellant who was at the relevant time Managing Director in about a dozen limited companies, along with the others, is believed to have made secret profits which were not offered for assessments and the I. T. O.s belief in this respect was strengthened by the unexplained acquisition of shares either in the appellant's name or in the names of his benamidars or relations and also because of unexplained assets noticed by the I. T. O. Taking this factor into consideration even without considering the disputed item of Rupees 22,00,000 which is discussed later on, the I. T. O. had sufficient reason to initiate proceedings under Section 34(1A) of the Act. In connection with the third ground of appeal raised by the appellant it is noticed that the I. T. O. has obtained the approval of the Central Board of Revenue for the issue of the notices under Section 34 (1A) and hence there is no substance in this contention.
8. In the assessment for 1945-46 the I. T. O. has assessed a sum of Rs. 9,00,000 as the appellant's profit on sale of shares of Associated Hotels India Ltd, This sum is taken as business profit of the appellant as the I. T. O. has given a finding that the shares of Associated Hotels India Ltd, were sold as a part of the operation of the appellant's business in shares and in carrying out a scheme for making profits. Appellant strongly contends that the I. T. O. while making the original assessment had before him the information about the, receipt of a sum of over Rs. 20,00,000 on sale of the shares of Associated Hotels India Ltd. and the I. T. O. had in the past taxed interest on the amount so deposited and hence the I. T. O. had no new facts or new evidence on the basis of which he could come to the conclusion that the profit arising from the sale of the shares was a business profit. The appellant contends that all the particulars about the sale of shares of Associated Hotels India Ltd. in October 1944 were produced before the I. T. O. at the time of original assessments for 1945-46 and 1946-47 and after considering the evidence produced by the appellant the then I. T. O. came to the conclusion that the profit was a capital profit and was not taxable. It is stated that the I. T. O. cannot take any action under Section 34 (1A) merely because he happens to change his opinion or to hold a different opinion from that of his predecessor on the same set of facts. It is noticed that before the original assessment the appellant had disclosed the particulars about the sales of the shares of Associated Hotels India Ltd, and interest on the deposit was duly taxed. These appeals are remanded to the T. T. O. for making enquiries on various points and while submitting the remand report the I. T. O. should give particulars of fresh evidence that came into his possession and which was not before his predecessor on the basis of which he came to the conclusion that the profit derived from the sale of shares is a business profit and not a capital profit. According to the I. T. O., this profit is derived in view of the scheme of profit making operations and while submitting the remand report the I. T. O. should give details of the evidence on the basis of which he comes to this conclusion and which might or might not be before his predecessor who made the original assessment. The detailed facts in this connection which may throw light on the 'fact whether the profit taxed from sales of shares of Associated Hotels India Ltd. is taxable or not are not given in this order as after (letting the remand report of the Income-tax Officer a decision will be given on this question after considering the evidence that may be led by the appellant and the remand report which may be submitted by the Income-tax Officer.'
I shall refer presently to these paragraphs in greater detail. It is against this order that this application is directed and in this application me petitioner asks for a writ in the nature of certiorari for bringing up the records & also for a writ in the nature of prohibition prohibiting the respondent from taking any further proceedings in pursuance of the impugned notices & for other reliefs. The matter came up for hearing before Banerjee, J. who in his judgment and order dated 7th December 1962 pointed out that the applications involve various points, but before him Mr. Ginwalla appearing on behalf of the petitioner made the following two points which according to the learned Judge were of such importance that it was necessary for him to refer the matter under Chapter 5, Rule 2 of the Rules on the Original Side of this Court, for hearing by a larger Bench. These two points were as follows: The first point was that Section 34(1A) of the said Act was discriminatory ami violative of the provisions of Article 14 of the Constitution and as such void. The second point was that the disclosures before the Investigation Commission could not be looked into by the Income-tax Officer for purposes of assessment under the said Act. It is as a result of the said reference that we are hearing this matter.
2. Before us, Mr. Sen appearing on behalf of the petitioner took the following points: (1) that the provisions of Section 34(1A) are discriminatory and violative of the provision of Article 11 of the Constitution and as such ultra vires and void, (2) that the Income-tax Officer had no jurisdiction to make assessment inasmuch as the pre-condition in Section 34 (1-A) namely that he should have 'reason to believe' that income, profits or gains chargeable to income had escaped assessment, was not satisfied. In other words, that in the facts and circumstances of the case, the Income-Tax Officer could not possibly have any reason to believe that there was any escape of assessment. (3) The third point taken was that the Appellate Assistant Commissioner could not partly decide the matter and partly remand it for hearing before the Income-Tax Officer and that the order of remand was virtually directing the Income-Tax Officer to reassess the petitioner and that this was not in accordance with law. (4) Lastly, the point was taken that the Income Tax Officer could not utilize the disclosures made by the petitioner before the Income-Tax Investigation Commission.
3. Mr. Gouri Mitter on behalf of the respondent has taken a preliminary point. He argues that where the petitioner making a writ application, has an alternative legal remedy and he was actually pursuing that remedy, he cannot be allowed to continue two parallel proceedings, and under such circumstances the writ proceedings should be dismissed. In our opinion, this is a point of law which has been substantiated and I shall now proceed to deal with the same. This precise point was considered by me in Marwari Mills Stores Co. v. A.K. Bandopadhayay : AIR1962Cal180 , where I have dealt with all the cases upto 1961. Upon a consideration of all the authorities. I held that normally, an application for a writ in the nature of Mandamus will not lie if there is an alternative remedy which grants adequate relief. In the case of a writ of certiorari or prohibition, the existence of an alternative remedy is by itself no bar to an application in the writ jurisdiction, provided certain factors exist e. g. an initial lack of jurisdiction, violation of the rules of natural justice etc. It is not that the Courts in such cases have no jurisdiction to entertain an application because of the existence of an alternative remedy, because in a suitable ease, relief might still be given. But, where the applicant was himself taking advantage of the alternative legal remedy and was actively pursuing it, he cannot at the same time carry on two parallel proceedings and the writ application in such a case should not be entertained. What happened in that case was that the petitioner had imported certain machinery and the customs authorities took proceedings against it and confiscated the imported goods under Section 167(8) of the Sea Customs Act. Against that order, the petitioner preferred an appeal before the Central Board of Revenue and at the time that the application came up for hearing, this appeal was still pending and it was stated before the Court that the petitioner intended to proceed with the same. A preliminary ground was taken that it could not actively pursue a parallel remedy and yet go on with the writ application. The preliminary ground was upheld and the application dismissed. I referred to the Supreme Court decision in, K.S. Rashid and Sons v. Income-Tax Investigation Commission, : 25ITR167(SC) and I cited the following observation of Mahajan. C. J. :--
'We think that it is not necessary for us to express any final opinion in this case as to whether Section 8(5) of the Act is to be regarded as providing the only remedy available to the aggrieved party and that it excludes altogether the remedy provided for under Article 226 of the Constitution.
For purposes of this case it is enough to state that the remedy provided for in Article 226 of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. So far as the present case is concerned, it has been brought to our notice that the appellants before us have already availed themselves of the remedy provided in Section 8(5) of the Investigation Commission Act and that a reference has been made to the High Court of Allahabad in terms of that provision which is awaiting decision. In these circumstances, we think that it would not be proper to allow the appellants to invoke the discretionary jurisdiction under Article 226 of the Constitution at the present stage, and on this ground alone we would refuse to interfere with the orders made by the High Court'
I also referred to another Division Bench Judgment of this Court presided over by Chakravartti, C. J. in Radhakissen v. E. Rajaram Rao, : AIR1955Cal241 , where a similar proposition was laid down by the Court of appeal. Reference may also be made to a Division Bench Judgment, presided over by Chakravartti, C. J. P.C. Ray and Co. (India). Private Ltd. v. A.C. Mukherjee I. T. O., : AIR1959Cal131 . This was also a case under the said Act, and against an assessment order, appeal had been filed before the Appellate Assistant Commissioner. Thereafter, while the appeal was pending the petitioner made an application under Article 226 of the Constitution. The learned Chief Justice said as follows :--
'On the facts above stated, the question before us is not whether a writ of certiorari can be asked for or issued when there is an alternative remedy. It is well known that the existence of alternative remedy is no bar or at least not an absolute bar, to the issue of a writ of certiorari when the circumstances call for its issue although the fact that such a remedy exists may be taken into consideration by the Court approached for a writ.
. . . . . .. . . . . . Mr. Mitra cited to us a recent decision of the Supreme Court in the case of State of U. P. v. Mohammad Nooh, AIR 1958 SC 86, but all that the case holds is that the superior Court may issue a writ of certiorari in particular cases, even if there be an alternative remedy or even if an appeal to the inferior Court Or tribunal was available, but not availed of or recourse had been had to it, with the result that the order questioned had been confirmed. The principle laid down by the Supreme Court must be accepted and applied, but I do not see that it covers the present case. The present case is one where it is not merely the position that an alternative remedy existed when the appellant approached the Court, but one where, after moving this Court for a writ and after obtaining a Rule, it went to pursue simultaneously a parallel remedy by way of an appeal under the ordinary law and kept his recourse to the alternative remedy from the knowledge of the Court up to the last moment. We are informed that the appellant's appeal before the Appellate Assistant Commissioner is still pending. In that state of the facts, the respondent has contended that we ought to follow the principle laid down by the Supreme Court in : 25ITR167(SC) . . . . . It was brought to the notice of the Court that the assessee had already caused a reference to be made to the High Court of Allahabad of the points involved in these cases under Section 18(5) of the Investigation Commission Act and that the reference was still pending. 'In these circumstances', observed the Supreme Court, 'we think that it would not be proper to allow the appellants to invoke the discretionary jurisdiction under Article 226 of the Constitution at the present stage'......'
4. The learned Chief Justice pointed out the danger of allowing two parallel proceedings to continue in the High Court. It was pointed out that in the proceeding pending before the Appellate Assistant Commissioner a reference may be made to the High Court, which might come to one kind of decision, whereas in the same Court, if a parallel proceeding under Article 226 was allowed to continue, it might come to a different conclusion. Thelearned Chief Justice also referred to the fact that the petitioner was not willing to withdraw the appeal before the Appellate Assistant Commissioner. In the present case also, Mr. Sen has made it quite clear that his client had no intention of withdrawing the appeal before the Appellate Assistant Commissioner, which proceeding, will be continued to its logical end. It appears that the English law is also the same. In the English case of--R. v. Kingsland Parish Inspector of Taxes,--Ex parte Pearson, (1922) 8 Tax Cas 327, Lord Hewart, C. J. said as follows:--
'I think it is a fact that the questionwhich had to be determined here was a question at the outset within the jurisdiction of thesurveyor, and if there is exception taken to theadditional first assessment which he has accordingly made, there is a clear right of appealunder the Act and that right of appeal is atthis present moment being pursued by theapplicant in this case. I think, therefore, thatthe application for the writ of prohibition manifestly fails . . . ............... . . ....... theSurveyor is acting within his jurisdiction. It may well be that the applicants for those Rules are not satisfied with the conclusion at which he arrived. But that being so, they have in this matter, as in the other matter, a right of appeal, and that appeal they are pursuing.
In these circumstances it seems to me that to ask for a certiorari about this certificate or refusal of certificate is very much upon all fours with a request for Prohibition in respect of the additional first assessment. What the Court sees before it is undoubted jurisdiction, decisions within the ambit of the jurisdiction, a right of appeal whereby incorrect conclusions may be corrected, and an actual recourse to that appeal by the applicants who are before the Court seeking these Rules.
In these circumstances I think that each of these applications fails, and that each of these Rules ought to be discharged.'
5. Mr. Sen appearing on behalf of the appellant, has cited several cases which were authority for the proposition that in cases of a writ of certiorari or prohibition, the mere existence of an alternative remedy is no bar to a writ petition, particularly where the question of initial jurisdiction or violation of rules of natural justice are concerned. This proposition is not denied by the respondent. But a clear distinction is to be made between cases where one is considering the mere existence of an alternative remedy, and eases where there exists an alternative remedy in law and that remedy is being actively pursued, giving rise to parallel proceedings. It is only in such oases that the abovementioned principle applies and a writ application should fail or at least should not be allowed to be proceeded with, so long as the legal action is pending. Two decisions cited by Mr. Sen, however, call for consideration. One is a Supreme Court decision--Chandra Bhan Gosain v. State of Orissa, : 2SCR879 . The facts in that case were as follows: The appellant manufactured and supplied large quantities of bricks to a company under a contract. These transactions were assessed to sales tax. The appellant contended that these were not sales which were subject to sales tax. He first of all filed appeals before the Sales Tax Appellate Tribunal against the orders of assessment. These appeals failed and the appellant applied to the High Court to compel the tribunal to refer the case on a question of law. The High Court rejected the application. But the appellant did not file any appeal to the Supreme Court against this order. Then he made an application under Article 226 of the Constitution and the High Court rejected the same. The appellant made an application in the Supreme Court for special leave to appeal against this order, which was granted. Before this application could be heard, the appeal pending before the Sales Tax Appellate Tribunal was dismissed. The question was raised as to whether in the facts of the case, the appeal to the Supreme Court under special leave was maintainable. It must be recollected that when the question came to be decided by the Supreme Court the appeal before the Sales Tax-Appellate Tribunal was no longer pending. The only question at issue was as to whether the appellant, not having preferred an appeal against the order by the High Court rejecting his application for a reference, an appeal against the rejection of his writ application would lie. It was held that the appellant could appeal against either of these orders of the High Court and there was no reason why the appeal pending before the Supreme Court by Special Leave should not continue. I do not see how this affects the question that we are considering. It is not that at the time of the hearing of the appeal before the Supreme Court another proceeding at law had been filed and was being pursued. The only question was whether the appellant having the right to challenge the two orders of the High Court, was precluded from challenging one of them only. Obviously, that was a different kind of question altogether. The second case cited by Mr. Sen is a Division Bench decision of the Kerala High Court, Bhargavan v. Abdul Majid, : AIR1961Ker183 . In that case, the petitioner was an elected member of the Kerala Legislature. An election petition was filed against him by the unsuccessful candidate, one of the grounds being that persons below the age of 21 had voted for the petitioner. This contention was not borne out by the electoral roll and the petitioner took the preliminary nomt before the Election Tribunal that the electoral roll was conclusive and the Tribunal had no jurisdiction to investigate into the correctness of the electoral roll. The Tribunal refused to entertain this point as preliminary point whereupon the petitioner made a writ application to compel the Election Tribunal to determine this preliminary point of jurisdiction. It was held that such an application was permissible. In my opinion, this case also is not to the Point. Certainly, a person defending a legal action can always come to the writ court challenging jurisdiction of the legal tribunal to proceed with the action, in suitable cases. It was not he, who had brought the legal action, and this makes all the difference, the principle being that the same person cannot initiate and conduct two parallel proceedings, one in a court of law and another in an equity court.
6. On the authorities, cited before us, we must hold that this preliminary point has been substantiated and because the applicant has appealed to the Appellant Assistant Commissioner, which appeal is not only pending, but the proceedings are being actively pursued and even before us the petitioner says that he will continue to pursue it, he should not be allowed to pursue this application in the writ jurisdiction. This would have been sufficient to dispose of the application, but we shall not rest our decision on the preliminary point alone, but will deal the merits also.
7. I have already enumerated the points raised on behalf of the petitioner. The first point is that the provision of Section 34 (1A) of the said Act was violative of Article 14 of the Constitution and as such ultra vires and void. Roughly speaking, the argument is that there is already a procedure that may be followed under Section 34 (1-A) which is less onerous and therefore, there was a violation of the Article 14 of the Constitution. Actually, this application was adjourned from time to time on the plea that this point was being agitated before the Supreme Court in another case. Mr. Sen now concedes that the point has been fully covered by several decisions. The first decision is a decision of the Supreme Court, K.S. Rashid and Sons v. Income-tax Officer, : 6SCR826 . The second decision is another decision of the Supreme Court--Commissioner of Income-tax, Patiala v. Shahzada Nand, : 60ITR392(SC) which has approved of my decision in Madanlal Jajodia v. Income-tax Officer : 58ITR693(Cal) . Mr. Sen has however stated that although he concedes that for the time being the point is wholly covered by the decisions of the Supreme Court, he is not abandoning the point, in case this matter also goes to the Supreme Court.
8. To clear the ground, it may be mentioned here that the last point namely that the fact that declarations and documents placed before the Investigation Commission could not be used by the Income-tax Officer was not pressed at the hearing before us. In any event, we did not hear any argument in respect of it. The contention of the respondent is that the Income-tax Officer is entitled to call for the documents and materials under Section 37 of the said Act. Nothing has been argued before us to repel this contention and we must hold against the petitioner on this point. I now come to the point No. (2) namely, that the pre-condition under Section 34(1A), that the Income-tax Officer has 'reason to believe' that there has been an escape of assessment, has not been fulfilled, and could not possibly be fulfilled on the materials before the Income-tax Officer and, therefore there is a lack if jurisdiction. The way that this point has been formulated Is as follows: Reference is first made to para. 4 of the petition, in which the petitioner states that in respect of the assessment of 1945-46 upon the income of the year ending 81st March, 1945 he had disclosed to the Income-tax Officer, the receipt of Rs. 20,65,705/ 13/0 in respect of shares of the Associated Hotels, and such receipt had been held to be a capital receipt in respect of which no income-tax was payable. It is further stated that in the return for the subsequent years, the interest on this amount had been duly disclosed and taxed. In the affidavit-in-opposition filed by Mahadevan Hariharan, Income-tax Officer, Central Circle, VI, Calcutta, affirmed on 23rd November, 1961 paragraph 4 of the petition was dealt with in paragraph 6. It is peculiar that in this paragraph what has been stated is that the petitioner had filed a return for the year 1946-47, in which the receipt of the said sum was not disclosed nor brought to the notice of the Income-tax Officer, nor was it held to be a capital receipt, nor was the interest received on the said moneys included in the assessment of the petitioner. It will be seen that while paragraph 4 deals with the assessment of 1945-46, the reply was with regard to the assessment of 1946-47. How this came about nobody can say. Mr. Mitra had to confess that this was an extremely negligent way of doing things. The question, therefore, is as to whether we should accept the statement in paragraph 4 that the petitioner disclosed the receipt of the said sum of over Rs. 20,00,000 in the year 1945-46. We looked into the return filed as well as the assessment order for 1945-46, but there is nothing mentioned there about the said sum or any part thereof. In the year 1946-47 there is mention of interest on deposits but nothing is mentioned as to the nature of the fund in respect of which Interest has been shown as income. However, it appears from the order of the Appellate Assistant Commissioner, mentioned above, an extract from which has been set out, that the petitioner did disclose the fact about the sale of shares in the Associated Hotels. We would, therefore, assume that in 1945-46 he disclosed to the Income-tax Officer that he had sold the shares in the Associated Hotels to Rai Bahadur Oberoi for a sum exceeding Rs. 20 lakhs, and the Income-tax Officer did not include it in his income but treated it as capital. We shall also assume that in the subsequent years the interest of this sum was disclosed and taxed as income. Coming now to the impugned notices under Section 34 (1A), it is seen that the notices clearly declare that the Income-tax Officer had 'reason to believe' that income, profits and gains assessable to income had escaped assessment, There is a note also at the bottom of the notices that they had been issued after necessary instructions of the Board of Revenue. As will appear from the provisions of Section 34 (1A), which has been set out above the proviso requires that the income-tax Officer shall not issue a notice under the said sub-rule unless he has recorded his reason for doing so and the Central Board of Revenue was satisfied on such reasons recorded that it was a fit case for the issue of such notice. In this case, the Income-tax Officer obtained the sanction of the Central Board of Revenue upon reasons recorded in writing. Tills record is not in the first instance disclosed to the assessee, but may be disclosed to the Court if it wants to see it. See Daularam Rawatmall v. Income-tax Officer, Central Circle VI Calcutta (unreported judgment dated 1-8-61 in Appeal from Original Order No. 209 of 1959 (Cal)). At the hearing before us Mr. Mitter on behalf of the respondent said that the recorded reasons were available and may be inspected by the court, and that these recorded reasons showed that the Income-tax Officer had ample reason to believe that income had escaped assessment. Mr. Sen strongly opposed our looking into these recorded reasons. I might also mention here that, nowhere in the materials placed before us did his client ever state that the reasons had never been recorded. In our opinion, in order to decide the point it is not necessary to travel beyond the order of the Appellate Assistant Commissioner Ext. 'H', read with the Income-tax assessment orders for the relevant period which are under challenge. Obviously, the Appellate Assistant Commissioner looked into the records, which included the statements and other materials filed with the Income-tax Investigation Commission by the petitioner. The order of the Appellate Assistant Commissioner read with the Income-tax assessment orders show that even if the petitioner had disclosed in 1945-46 that he had sold certain shares in the Associated Hotels, to Rai Bahadur Oberoi, the subsequent information that was received by the Income-tax Officer threw doubts on the nature and origin of the shares as also the nature of the sale. The previous disclosure was that he had a large number of shares in the Associated Hotels and that he had sold them to Rai Bahadur Oberoi. The materials and the information that subsequently came into the possession of the Income-tax Officer, gave him reason to believe that the petitioner had been selling and purchasing shares, not by way of investment merely, but as a business transaction for gaining profit. The Appellate Assistant Commissioner has clearly stated that the Income-tax Officer had reason to believe, not only in respect of this large sum of over twenty lakhs, but with regard to other sums also, that their origin had not been explained, leaving the Income-tax Officer to believe that the petitioner, by becoming managing director of about a dozen limited companies, made large secret profits and bought shares in the name of others as benamdars and thereby made large secret profits, all of which needed investigation. I have already mentioned the very suspicious conduct of the petitioner in failing to call the people in whose name he had purchased the shares or even furnishing their addresses. I have already set out above paragraphs I and 8 of the order of the Appellate Assistant Commissioner. They amply demonstrate that it was found from the records that the Income-tax Officer had reason to believe that income had escaped assessment, so that the pre-condition in Section 34 (1A) has been fulfilled. The Appellate Assistant Commissioner appears to have acted with great fairness. After relating all the facts, he found it difficult to come to a conclusion without further materials on the question as to what fresh evidence was before me Income-tax Officer to convince him that this sum of about Rs. 20 lakhs, which was previously treated as capital, should be treated as income. This is one of the principal reasons why he remanded back the case to the Income-tax Officer for inquiry under Section 31 (2) of the said Act. Apart from this question of the sale proceeds of the shares of the Associated Hotels, it is amply shown by the order of the Appellate Assistant Commissioner that there are many other point which require elucidation, and there were ample materials before the Income-tax Officer which led him to reopen the assessment proceedings. It may be that the Income-tax Officer, in his assessment orders had not adequately marshalled the facts, and this is the precise reason that the Appellate Assistant Commissioner has ordered a further inquiry. Doubtlessly, these matters will be gone into when the appeal is finally determined. In our opinion, the petitioner has failed to establish that the pre-condition in Section 34 (1A) has not been fulfilled and consequently there was an initial lack of jurisdiction.
9. It remains for me to deal with the last ground, namely the objection as to the remand order made by the Appellate Assistant Commissioner. Mr. Sen has argued that the Appellate Assistant Commissioner has not really remanded the matter under Section 37 (2) of the said Act but has decided part of the appeal and has remanded the rest with direction to make a reassessment. If this is a correct description of the order made by the Appellate Assistant Commissioner, it is defective. Under Sub-section (2) of Section 31 the Appellate Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit or cause further inquiry to be made by the Income-tax Officer. In such cases, the assessment already made has not to be first set aside. That can only be done under Sub-section (3b) of Section 31. Under that provision the Appellate Assistant Commissioner can set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the income-tax Officer thinks fit or as the Appellate Assistant Commissioner may direct. It is amply clear to me that the Appellate Assistant Commissioner has not acted under Sub-section (3b) but under Sub-section (2) of Section 31 of the said Act. I am unable to accept the argument of Mr. Sen that the Appellate Assistant Commissioner has partly decided the question of jurisdiction and has asked the Income-tax Officer to make reassessment. In paragraph 13 of the petition the petitioner has himself taken up the position that the Appellate Assistant Commissioner has not decided the case before him and has remanded it to the Income-tax Officer, Central Circle XI to submit a report on various lines. It is his own complaint thatthe Appellate Assistant Commissioner has not disposed of the appeal 'at all'. After this it is not open to the petitioner to urge that the Appellate Assistant Commissioner has disposed of part of the appeal or has decided the question of jurisdiction. That is a substantial change of front. In our opinion this point falls.
10. For the reasons aforesaid this application is dismissed. The Rule is discharged--no order as to costs. All interim orders are vacated.
Arun K. Mukherjea, J.
11. I agree.
S.K. Mukherjea, J.
12. I agree.