Amiya Kumar Mookerji, J.
1. This appeal is by the assessee and it is directed against the judgment and order of K.L. Roy J. dated the 4th March, 1970, Kerorimull and Co. v. Income-tax Officer : 79ITR270(Cal) , discharging a rule nisi obtained by the assessee.
2. The appellant is a partnership firm. For the assessment year 1960-61 the Income-tax Officer, 'A' Ward, District 11(1), Calcutta, completed the assessment under the old Act, namely, the Indian Income-tax Act, 1922. Thereafter, on the 14th March, 1969, the appellant received a notice issued under Section 148 of the Income-tax Act, 1961, whereby the appellant was called upon to submit the return of income for the assessment year 1960-61, as the said Income-tax Officer had reason to believe that the appellant's income chargeable to income-tax for the said assessment year had escaped assessment within the meaning of Section 147 of the new Act. It appears that one of the partners of the appellant's firm, Seth Kerorimull, made certain disclosures under the Finance Act of 1965. The appellant challenged the validity of the said notice and filed an application under Article 226 of the Constitution before this court. A rule nisi was issued on the 3rd of April, 1969. The said rule being Matter No. 218 of 1969 was finally heard and disposed of by K. L. Roy J. by his order dated the 4th of March, 1970. The learned judge was of opinion that there were some reasons for the respondent, the Income-tax Officer, to have issued a notice under Section 148 of the Income-tax Act, 1961, and accordingly the said rule was discharged.
3. The appellant being aggrieved by the said judgment and order of the learned trial judge preferred this present appeal in this court.
4. Mr. pal, appearing on behalf of the appellant, contended that the learned judge erred in holding that there were sufficient reasons for issue of a notice under Section 148 of the Income-tax Act, 1961. According to Mr. Pal, the Income-tax Officer has not disclosed any reasons for his belief that the income had escaped assessment and conditions precedent for assumption of jurisdiction under Section 148 of the Income-tax Act, 1961, had not been satisfied. The learned trial judge should have quashed the said notice by a writ of mandamus. Mr. Pal relied upon the decisions of the Supreme Court in the case of Sheo Nath Singh v. Appellate Assistant Commissioner of Incometax, : 82ITR147(SC) the case of Chhugamal Rajpal v. S.P. Chaliha, : 79ITR603(SC) .and the case of Commissioner of Income-tax v. Burlop Dealers Ltd., : 79ITR609(SC) .
5. It appears that the reason for the belief of the Income-tax Officer has been stated in paragraph 7 of the affidavit-in-opposition which reads as follows : The Income-tax Officer had reason to believe that the amounts shown to be credited in the books of accounts of the petitioner, namely, the appellant, as and by way of hundi loans and interest shown to have been paid thereon were not genuine and were fictitious. The petitioner omitted and/or failed to disclose fully and truly all material facts necessary for the assessment of the income of the petitioner and that income chargeable to tax escaped assessment. Mr. Pal contended that the case is similar to that of Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax. In that case it appears that the reasons for such belief recorded are as follows :
' (i) The assessee who is or was at the relevant time a managing director in about a dozen limited companies along with 'Oberois' is believed to have made some great profits which were not offered for assessment.
(ii) The assessee is believed to have received a sum of Rs. 22 lakhs from ' Oberois ' and this sum or at least part of which represents income which has escaped assessment.'
6. In that case the Supreme Court found that there was no material or fact which has been stated in the reasons for starting the proceedings on which any belief could be founded of the nature contemplated by Section 34(1A) which is similar to the provisions of Section 147(a) of the Income-tax Act, 1961. In the instant case sufficient materials have been disclosed that from the account books certain amounts shown to have been credited by way of hundi loans and an interest shown to have been paid thereon were not genuine and were fictitious. So the facts of the presentcase are different from that of Sheo Nath Singh's case upon which reliance was placed by Mr. Pal.
7. The next case cited was Chhugamal Rajpal's case. This case also, in our opinion, is distinguishable from the facts of the present case. It was found from the report submitted by the Income-tax Officer to the Commissioner that no reason for coming to the conclusion that it was a fit case for issue of the notice under Section 148 was found. In the said report it was stated that proper investigation regarding these loans was necessary.
8. Two distinct conditions precedent are to be fulfilled before the Income-tax Officer can exercise jurisdiction under that section: (1) he must have reason to believe that the income has escaped assessment; (2) he must have reason to believe that such escapement is by reason of omission or failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for his assessment for the relevant year. In the instant case it appears to us that the two conditions stated above have been fulfilled and accordingly the Income-tax Officer has jurisdiction to issue a notice under Section 148 of the Act.
9. In Burlop Dealers case the Income-tax Officer made a wrong inference in assessment. The Supreme Court held that a proceeding under Section 34(1)(a) will not lie merely on the ground that the Income-tax Officer has drawn an inference which he later regarded as erroneous. That decision is of no assistance to the appellant in the facts and circumstances of the present case.
10. Our attention was further drawn to a judgment of ours dated July 18, 1973, in an Appeal From Original Order No. 3 of 1973, Income-tax Officer v. Dwarkadas Shah Brothers (P.) Ltd., : 95ITR527(Cal) . In that case the Income-tax Officer recorded his reasons that on the basis of the records available some of the loans are from parties who have declared before the department that they were doing name-lending business. Upon what materials or facts that belief has been formed, has not been indicated in the reasons or in the affidavit filed by the department before the trial court. At the time of hearing the department wanted to rely upon a statement in response to the summons under Section 131 of the Income-tax Act, of one Shri Girdhari Singh, whose business had been closed on and from 31st March, 1965. That statement was produced before us. The said statement, however, was recorded by another Income-tax Officer, ' E ' Ward, District I, on the 8th December, 1965. Accordingly, we were of the opinion that that statement could not be the basis of the records which were available to the Income-tax Officer of the other district. Moreover, nowhere it is stated in the affidavit that on what date the said statementwas received by the Income-tax Officer. So, the facts of the said case are different from that of the present case and that decision, according to our view, has no bearing upon the facts of the present case.
11. Considering the facts and circumstances of the present case we find no reason to differ from the view of the learned trial judge. Accordingly, this appeal fails and it is dismissed.
12. There will be no order as to costs.
Amaresh Roy, J.
13. I agree.