A.N. Sen, J.
1. The department has preferred this appeal against the judgment and order passed by T. K. Basu J. on the 28th February, 1973 (See : 100ITR531(Cal) ). By this order, the learned judge for reasons stated in his judgment quashed several notices issued by the ITO under Section 148 of the I.T. Act, 1961, for reopening the assessments of the assessee, Hongkong and Shanghai Banking Corporation (hereinafter referred to as the assessee or the bank), for the assessment years 1950-51 to 1960-61.
2. The assessee filed this writ petition in this court under Article 226 of the Constitution challenging the validity of the various notices issued under Section 148 of the I.T. Act, 1961, for reopening the assessment of the bank for the assessment years 1950-51 to 1960-61. In the said application an affida-vit-in-opposition was filed on behalf of the departmeat by one Ranabir Prosad Dobe affirmed by him on the 22nd November, 1965. As the saidaffidavit, according to the learned trial judge, was of no assistance and did not furnish any material, the learned trial judge gave the department another opportunity of filing a further affidavit. Pursuant to leave granted by the court a further affidavit was filed by one Sailesh Kumar Chakra-borty affirmed on the 28th May, 1970. It appeared that in the said affidavit filed by Sailesh Kumar Chakraborty, ITO, 'C' Ward, there was a palpably incorrect statement. The attention of the learned trial judge was drawn to the said false statement made in the said affidavit and Mr. Suhas Sen, learned counsel, who appeared on behalf of the department before the learned trial judge, tendered an apology on behalf of the deponent for the obviously untrue statement made by him in the said affidavit. In view of the apology tendered before the learned trial judge, the learned trial judge did not pursue the matter any further. The learned trial judge had called for the records and the reasons which were recorded for the purpose of reopening the assessment were also produced before the learned trial judge and copies thereof were tendered by consent of the parties before the learned trial judge. The learned trial judge has set out in his judgment the recorded reasons. The learned trial judge carefully considered the facts and circumstances of this case and also the recorded reasons and on a consideration of the materials the learned trial judge was of the opinion that there were no materials which could lead to the formation of belief on the part of the ITO that the income of the assessee had escaped assessment on account of any failure or omission on the part of the assessee to disclose truly and fully all the material facts. In other words, the learned trial judge was of the opinion that the requirements of Section 147 of the Act were not complied with and the ITO did not have the jurisdiction to issue the notices. The learned trial judge, therefore, made the rule absolute and passed an order quashing the said notices.
3. Against the said order of the learned trial judge, this appeal has been preferred by the department. In the paper book printed by the department in this appeal the affidavit of Sailesh Kumar Chakraborty which was filed before the learned trial judge and which became the subject-matter of comment was not included. In place of the said affidavit of Sailesh Kumar Chakraborty containing the untrue statement for which an apology was tendered en behalf of the deponent before the learned trial judge, another affidavit, alleged to have been affirmed by him on the 28th May, 1970, which was in fact never affirmed by him and which did not form any part of the proceeding before the learned trial judge was included. In the affidavit which was included in the paper book alleged to have been affirmed on the 28th May, 1970, the material paragraph containing the untrue statement in the affidavit of Sailesh Kumar Chakraborty filed before the learned trial judge was not there. At the time, when the appeal cameup for hearing the attention of this court was drawn to this fact by Dr. Pal, learned counsel appearing on behalf of the respondent-bank. Mr. Suhas Sen, learned counsel appearing on behalf of the appellant asked for adjournment of the appeal for the purpose of looking into the matter and Mr. Sen at that point of time had also submitted before the court that if he did not find any satisfactory explanation as to how this had happened he might not press the appeal. When the appeal came up for hearing on the adjourned date Mr. Sen stated before us that he would not be pressing the appeal. It appears to us that he was not obviously satisfied as to how this thing had happened. On the aforesaid statement of Mr. Sen we dismissed the appeal on that occasion, as the appeal was not pressed. Thereafter an application was made on behalf of the appellant for recalling the said order of dismissal of the appeal. The main ground urged for recalling the order of dismissal was that the learned counsel had no authority not to proceed with this appeal. It was further urged that it was the duty of the learned counsel to proceed with this appeal and the dismissal of the appeal on the ground that the same had not been proceeded with has caused the department serious prejudice. On a proper consideration of the said application we recalled the earlier order of dismissal and directed the appeal to be restored to the list and we also gave liberty to the department to file a supplementary paper book containing the affidavit affirmed by Sailesh Kumar Chakraborty which was in fact filed before the learned trial judge.
4. We cannot help observing with regret that the conduct of the department in the instant case appears to be far from what it should be. We only hope that there will be no repetition of this in future.
5. Let us now consider the merits of the appeal. The facts of this case have been fully set out by the learned trial judge in his judgment. He has also properly considered the respective contentions of the parties and also the various decisions which were cited. In our opinion, the learned trial judge on a proper consideration of the materials has correctly come to the conclusion that the issue of the impugned notices for reopening the assessments of the assessee is clearly unjustified. In our view no grounds have been made out for any interference with the order passed by the learned trial judge.
6. The question of validity of the notices issued under Section 148 of the Act and also under the appropriate sections of the earlier Act has come up for consideration in a large number of cases before the Supreme Court and also the High Courts. The principles of law, in our opinion, are well settled. Applying the well settled principles of law we are of the opinion that in the instant case there is no material which could lead to the formation ofthe belief on the part of the ITO that the income of the assessee hadescaped assessment due to any failure or omission on the part of the assesseeto disclose truly and fully all material facts. As the learned trial judgehas rightly observed the affidavits affirmed on behalf of the department areof no assistance. The recorded reasons which have been quoted by the learned trial judge in his judgment also do not go to show that there is anymaterial which can lead to the formation of any belief on the part of theITO that the income of the assessee had escaped assessment in the relevantyears because of any failure or omission on the part of the assessee todisclose truly and fully all the material facts.
7. The learned Advocate-General appearing on behalf of the appellant has argued that the fact that the assessee has claimed the very same expenses in, respect of which the assessee had claimed deduction in its assessment in India in the respective foreign countries clearly furnishes the necessary material on the basis of which the ITO was entitled to act. The learned Advocate-General has contended that sufficiency or adequacy of the material is of no consideration. It is his argument that the fact that the assessee had asked for deduction in respect of the very same expenses in the foreign countries justifiably leads the ITO to the belief that the said expenses in India could not, therefore, have been claimed as allowable deduction in the computation of assessee's tax liability in India.
8. In our opinion, this contention of the learned Advocate-General has no substance in the facts and circumstances of this case. It is to be noticed that the assessee had made the claim in his return. After the assessee had made the claim, by the letter dated the 22nd January, 1951, which appears at page 39 of the paper book, the ITO dealing with the assessments of the assessee made, inter alia, the following query :
'It is noticed that for the first time proportion of Head Office, LondonOffice, U.S.A. Office expenses applicable to London Offices amounting to Rs. 4,21,918 has been deducted from profit--please state the circumstancesin which such deduction has been made.'
9. This query of the ITO was answered by the assessee by its letter dated the 12th March, 1951, which appears at page 37 of the paper book. The assessee has stated in reply:
'Our London and New York Offices each in their own spheres collects proceeds and handle all our export bills and documents and establish letters of credit for Indian exporters. They also supervise and handle all bills and documents covering imports into India and transmit letters of credit established by our Indian Branches at the request of the Indian Importers.'
10. Further queries were raised by the ITO by his letter dated the 20th March, 1951, which appears at page 35 of the paper book. In this letter the ITO asked for 'details of charges, special charges and legal charges in respectof London and U.S.A. expenses so that their co-relation with the Indianbusiness may be judged'. Further information was given by the assessee.It appears that after discussion a formula was also accepted as to how thecomputation is to be made. The facts and circumstances clearly go toindicate that there had been no failure on the part of the assessee in the.matter of disclosure and it cannot be said that the assessee had failed todisclose truly and fully all the material facts which were necessary for thepurpose of the assessee's assessment.
11. An analysis of the recorded reasons also clearly indicates that the saidrecorded reasons do not furnish any material. The said recorded reasonsat the most may indicate some kind of suspicion or disbelief in the mind ofthe ITO but the recorded reasons do not furnish any materials which canlead to the formation of the belief that the income of the assessee had escaped assessment due to the failure of the assessee. to disclose fully and truly all the material facts. This aspect of the matter has also been carerfully considered by the learned trial judge. We are, therefore, of the opinionthat there is no merit in this appeal. This appeal, therefore, fails. Theappeal is dismissed. There will be no order as to costs. Assessments, ifany, pursuant to the said notices are also quashed.
Bimal Chandra Basak, J.
12. I agree.