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Sudhir Kumar Bhose Vs. Income-tax Officer, h Ward, District Iii(i), and Another. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 185 of 1966
Reported in[1968]69ITR446(Cal)
AppellantSudhir Kumar Bhose
Respondentincome-tax Officer, "h" Ward, District Iii(i), and Another.
Cases ReferredCalcutta Discount Co. Ltd. v. Income
Excerpt:
- this is a writ petition under article 226 of the constitution. in this petition the petitioner prays for the issue of a writ of certiorari for quashing the notice dated the 22nd february, 1966, issued by the respondent, income-tax officer, under section 148 of the income-tax act, 1961, for reopening the assessment of the petitioner, for a writ in the nature of mandamus commanding the respondent income-tax authorities is rescind, cancel or withdraw the said notice and for a writ of prohibition restraining the respondents from giving any effect to the said notice or from taking any steps pursuant thereto.the facts relevant for the purpose of this application may be noted. the petitioner is a lawyer practising in this court. he has various immovable properties from which he derives income......
Judgment:

This is a writ petition under article 226 of the Constitution. In this petition the petitioner prays for the issue of a writ of certiorari for quashing the notice dated the 22nd February, 1966, issued by the respondent, Income-tax Officer, under section 148 of the Income-tax Act, 1961, for reopening the assessment of the petitioner, for a writ in the nature of mandamus commanding the respondent income-tax authorities is rescind, cancel or withdraw the said notice and for a writ of prohibition restraining the respondents from giving any effect to the said notice or from taking any steps pursuant thereto.

The facts relevant for the purpose of this application may be noted. The petitioner is a lawyer practising in this court. He has various immovable properties from which he derives income. The petitioner is assessed to income-tax as also to wealth-tax. In the returns submitted by the petitioner for assessment of his income-tax he has been showing the income derived from his properties. The petitioner had half share in the property No. 15, Gobinda Mondal Road, Calcutta. The petitioner sold his share in the said property on the 5th of August, 1960, for the sum of Rs. 1,75,000. This property had all along been shown in the petitioners returns for the assessment wealth-tax; and for the purpose of assessment under the Wealth-tax Act the petitioners share in this property had been valued at Rs. 1,70,000. On the basis of the said valuation of the petitioners share in the said property, the petitioner was being assessed to wealth-tax. The petitioner had obtained necessary clearance certificate as required under the Wealth-tax Act, when the petitioner sold his share in the said property at No. 15, Gobinda Mondal Road. The petitioner had shown the income derived from his share in this particular property in his income-tax returns for the years prior to the assessment year 1961-62. In the return filed by the petitioner for assessment of his income-tax for the assessment year 1961-62, this property or the income therefrom had not been included but in the said return amount of interest from securities, which, according to the petitioner, were purchased out of the sale proceeds of the said property, had been included. The return submitted by the petitioner for the said year of assessment 1961-62 was considered and assessment order was duly passed by one N.C. Khasnabis, who was the then Income-tax Officer, dealing with the petitioners assessment. It may be noted that the said Mr. Khasnabis was at relevant time also the appropriate officer dealing with the assessment of the petitioner under the Wealth-tax Act. For the said assessment year 1961-62, the petitioners income had been assessed at Rs. 33,412 and an order of assessment was passed on the 27th of December, 1962, by Mr. Khasnabis, the then officer dealing with petitioners case. On the 18th January, 1966, Sri A.R. Das Gupta, who had then become the Income-tax Officer in charge of 'H' Ward, District III(I), Calcutta, dealing with the assessment of the petitioner, wrote the following letter to the petitioner :

'I am informed that you sold your property at No. 15, Gobinda Mondal Road, Cossipore, Calcutta, on August 5, 1960, at a price of Rs. 1,75,000. You are requested to let me know when you acquired the above property and the purchase price and/or cost of acquistion of the same to enable me to determine capital gains arising out of the above transaction. You are required to see me in this connexion on February 2, 1966, at 12 noon.'

By his letter dated the 2nd of February, 1966, the petitioner replied to the said letter of the Income-tax Officer. In his reply the petitioner had, inter alia, contended that the fact of the sale of the property was known to the officer who had been dealing with the petitioners assessment of income-tax and wealth-tax and the officer concerned also knew about the valuation of the property at the relevant time and the assessments were all completed with the knowledge of all facts. The petitioner had further stated that there was no question of any capital gain arising out of the sale of the said property and had requested the officer to drop the enquiry proceedings.

On the 22nd of February, 1966, the Income-tax Officer issued a notice under section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the petitioner for the said assessment year 1961-62. The said notice may be set out :

'Notice under section 148 of the Income-tax Act, 1961, Income-tax Circle, District III(I), Calcutta.

Dated 22nd February, 1966. No. III(I) 665 b/H.

To

Sudhir Krishna Bhose,

24-A, Roy Bagan Street,

Calcutta.

Whereas I have reason to believe that your income chargeable to tax for the assessment year 1961-62 has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961.

I, therefore, propose to reassess the income for the said assessment year and I hereby require you to deliver to me within thirty days from the date of service of this notice, a return in the prescribed form of your income assessable for the assessment year.

Sd/- Illegible

Income-tax Officer, H-Ward,

District III(I), Calcutta.'

By his letter dated the 21st of March, 1966, to the Income-tax Officer, the petitioner challenged the jurisdiction and/or authority to reopen the assessment and requested the said officer to cancel and/or withdraw and/or rescind the said notice and to drop forthwith the said proceedings.

The assessment order in respect of the wealth-tax and income-tax of the petitioner for the assessment year 1961-62, and the correspondence which passed between the petitioner and the Income-tax Officer and which have just been referred to, have all been set out in the petition.

In this petition the petitioner challenges the validity and/or legality of the said notice dated the 22nd February, 1966, and the competence and jurisdiction of the Income-tax Officer to reopen his assessment for the said assessment year 1961-62. The grounds on which the petitioner challenges the validity of the said notice and the competence and jurisdiction of the Income-tax Officer to the validity of the said notice and the competence and jurisdiction of the Income-tax Officer to reopen the said assessment, are set out in paragraph 15 of the petition.

Mr. D. Pal, learned advocate appearing on behalf of the petitioner, has submitted that a notice under section 148 of the Income-tax Act can only be issued by the Income-tax Officer, if there by any case for reassessment under section 147 of the Income-tax Act, 1961. He submits that unless a case comes within the provisions of section 147 of the Income-tax Act, the Income-tax Officer has no power or jurisdiction to start and reassessment proceeding and to issue any notice under section 148 of the Income-tax Act, 1961. He has drawn my attention to section 147 of the Income-tax Act, 1961, which reads as follows :

'147. Income escaping assessment. - If -

(a) 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 under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,

he may, subject to the provisions of sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year).

Explanation 1. - For the purposes of this section the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-

(a) where income chargeable to tax has been under-assessed; or

(b) where such income has been assessed at too low a rate; or

(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1992 (11 of 1922); or

(d) where excessive loss or depreciation allowance has been computed.

Explanation 2. - Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.'

Relying on this provision Mr. Pal has contented that the Income-tax Officer can derive jurisdiction to reopen an assessment for the purpose of reassessment only if the conditions laid down in the said section 147 are satisfied. It is Mr. Pals contention that unless the conditions laid down in the said section 147 are satisfied, the Income-tax Officer does not have any jurisdiction to reopen any assessment and will, in a case where the conditions laid down are not satisfied, be without jurisdiction and as such illegal and void. In support of the contention that the Income-tax Officer does not have any jurisdiction to reopen any assessment made, unless the conditions laid down are satisfied, Mr. Pal has referred to the decision of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta. In that case the Supreme Court had to deal with section 34(1) (a) of the Indian Income-tax Act (XI of 1922), which corresponds to section 147(a) of the Income-tax Act, 1961. Mr. Pal has relied on the following observations of the Supreme Court at page 199 :

'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.'

Mr. Pal has also referred to the decision of the Madras High Court in the case of Gordon Woodroffe & Co. Ltd., London v. Income-tax Officer, Madras and to the decision of the Bombay High Court in the case of Phalton Sugar Works Ltd. v. B. J. Chackoo, Income-tax Officer, Companies Circle II(3), Bombay. Mr. Pal has cited the decision of the Madras High Court in the case of E. M. Muthappa Chettiar v. Commissioner of Income-tax and has placed particular reliance on the following observations at page 650 of the report :

'An exhaustive commentary on the precise content of these crucial words of the statute cannot be written with any measure of success. To repeat the favourite judicial dictum, everything depends on the facts of each case; material facts have no legal connotation and the undisclosed facts are material or not according to the circumstances of the assessment in the particular case. The Supreme Court has given the words the meaning primary relevant facts. It is the duty of the assessee to reveal the major facts which have a bearing on the assessment to be made. He must of course make a clean breast of all the sources of his income and the income derived therefrom. He must not hide any books of account or documents which would help the computation of the income. He is not expected to do more than this. He cannot delve into the mind of the Income-tax Officer and try to fathom it and predicate what are material facts in the view of the officer. The facts must be such that if taken into account, they would have an adverse effect on the assessee by the passing of a greater assessment than the one actually made. The rule of full and true disclosure of material and necessary facts should not be so fastidiously construed as would enable the department to say that non-disclosure of a fact which may have a remote bearing on the assessment attracts the section, as the assessing officer would have material use of it to charge the assessee more than what he did. The Income-tax Officer cannot certainly fall back on the section to make good his deficiencies in the first completed assessment. Cases sought to be brought within section 34(1)(a) should strictly fall within that provision and it is for the department to show that the necessary conditions for the exercise of jurisdiction are fully present. The department is not at liberty to take hold of any and every circumstances, call it non-disclosure of material facts and set the machinery of reassessment in motion. If this were to be permitted, there is every danger of this provision of law being used as an instrument of oppression against the assessee. The true position is that if the Income-tax Officer was left in the dark in respect of basic and crucial facts, relevant to the assessment, he has jurisdiction to reopen the assessment and pass orders of reassessment.'

Mr. Pal has submitted that in the instant case the conditions precedent to the exercise of jurisdiction under section 147 of the Income-tax Act, 1961, have not been satisfied; and relying on the authorities cited by him and also on the provisions contained in the said section, he submits that the Income-tax Officer has in the instant case acted illegally and without jurisdiction in issuing the said notice dated the 22nd of February, 1966, under section 148 of the Income-tax Act. Mr. Pal has contended that in the instant case the Income-tax Officer has purported to exercise his jurisdiction under section 147(a) of the Income-tax Act, 1961. He contends that in invoke jurisdiction under the section, two conditions have to be fulfilled, namely :

(1) the Income-tax Officer must have reason to believe that income, profits or gains chargeable in income-tax have been under-assessed, and

(2) 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 the assessee to make the return of his income, 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.

It is the contention of Mr. Pal that none of these conditions are satisfied in the facts and circumstances of this case and, in any event, there has been no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year. Mr. Pal has argued that the petitioner has disclosed all relevant basis or primary facts and there has been no omission or failure on the part of the petitioner. He argues that the petitioners share in the said property, No. 15, Gobinda Mondal Road, had been shown in all the wealth-tax returns and for the purpose of the said returns since 1956, his share in the said property had been valued at Rs. 1,70,000 on the basis of which wealth-tax had been computed. At the time of the sale of the said property the petitioner had to obtain the necessary wealth-tax clearance certificate and the petitioner had duly disclosed the fact of sale of the petitioners share in the said property at a sum of Rs. 1,75,000. He argues that the petitioner has been granted the necessary wealth-tax clearance certificate on the basis of which only the conveyance could he registered. He has drawn my attention to the fact that after the sale of the said property, the income derived from the said property had not been mentioned in the income-tax return, but the income derived from the securities purchased out of the sale proceeds have been included in the return filed by the petitioner. He has drawn my attention also to the fact that at the time of assessment, the officer dealing with the petitioners wealth-tax and income-tax returns was the same person whose name was N. C. Khasnabis. It is the contention of Mr. Pal that the officer dealing with wealth-tax and income-tax returns of the petitioner has been acquainted with all relevant facts, Mr. Pal argues that the said officer knew about the sale of the property, knew about the price at which the property was sold and also knew about the valuation of the property at the relevant time; and as the said officer has been satisfied that there was no question of any capital gain, the said officer had duly passed his orders on the returns filed by the petitioners; and the present Income-tax Officer is now seeking to take a different view of the facts which had all been disclosed and discussed and which were known to the then officer. He submits that it is not open to the Income-tax officer to reopen the assessment, even though he may be entitled to take a different view of the fact which has been disclosed by the petitioner. He has drawn my attention to the letter dated the 23rd of March, 1966, purported to have been addressed by the Income-tax Officer to the petitioner. The said letter which is annexed to the affidavit affirmed by Asoke Ranjan Das Gupta on the 9th day of June, 1966, reads as follows :

'Sri S.K. Bhose,

24-A, Roy Bagan Street,

Calcutta,

Ref : Notice under section 148 for 1961-62.

Ref : Your letter dated March 21, 1966.

Please refer to the above. It is found that you did not fill in Part VII of the income-tax return for the year 1961-62 showing capital gain or loss. From the information available with me I find that the value of the property as on January 1, 1954, will be less than Rs. 1,70,000. Further I find that at the time of the wealth-tax assessment for 1961-62 the Income-tax Officer was informed that the sale price of the house was Rs. 1,70,000.

Under the above circumstances there can be no question of cancelling the notice under section 148.

Yours faithfully,

(A.R. Das Gupta)

Income-tax Officer,

H-Ward, Dt. III(I), Calcutta.'

The receipt of this letter is denied by the petitioner. Analysing the said letter Mr. Pal has, however, argued that according to the income-tax authorities the grounds for reopening the assessment are the following :

1. Not filling in Part VII of the income-tax return.

2. Value of the property as on January 1, 1954, will be less than Rs. 1,70,000, and

3. At the time of the wealth-tax assessment for 1961-62 the Income-tax Officer was informed that the sale price of the house was Rs. 1,70,000.

Mr. Pal contents that none of the alleged grounds are tenable and the same cannot and do not justify the reassessment proceeding sought to be initiated by the Income-tax Officer. He argues that there is no legal obligation of filling in Part VII of the income-tax return, particularly when according to the petitioner, there was no question of any capital gain or loss. He has argued that it is not correct to say that at the time of the wealth-tax assessment for 1961-62, the Income-tax Officer was informed that the sale price of the house was Rs. 1,70,000. He has referred to the letter dated July 7, 1960, addressed by the petitioner to the Wealth-tax Officer requesting the officer to grant the certificate as required under section 34 of the Wealth-tax Act and has drawn my attention to the fact in the said letter, the sale price has been stated to be Rs. 1,75,000. It is to be noted that receipt of this letter is not admitted by the respondents. Mr. Pal contents that this letter must have been received, as on the basis of the said letter the necessary certificate had been given on July 7, 1960. A copy of the letter dated July 6, 1960, and the copy of the certificate dated July 7, 1960, have been both set out in the supplementary affidavit affirmed by the petitioner on August 8, 1960, and filled in this proceeding. Mr. Pal submits that it cannot be disputed that the necessary certificate had been granted as with out such a certificate, no conveyance could be registered and he contents that court should hold that this letter must have been given by the petitioner and must have been received by the Wealth-tax Officer. With regard to the figure of Rs. 1,75,000 mentioned in the assessment order, Mr. Pal contends that the said figure must have been mentioned there by the officer concerned, as, after discussion, the officer concerned had appreciated and realized that the net sale price was Rs. 1,70,000 after deduction of expenses of Rs. 5,000 for and incidental to the sale from the total sale proceeds. Mr. Pal further contends that there is no basis for the opinion of the Income-tax Officer that the price of the property was less than Rs. 1,70,000 on January 1, 1954, and it is his contention that in any event that is a matter of opinion or of personal view of the officer concerned. He contends if the officer concerned chooses to take a different opinion or a view with regard to the price, the same cannot be ground for reopening the assessment unless it be established that there had been any omission or failure on the part of the petitioner. It is contended that there has been no failure or omission on the part of the petitioner and, upon disclosure of all relevant material and primary facts, the than Income-tax Officer after discussion with the petitioner had made the assessment and it is not open to the present Income-tax Officer to reopen the sale assessment on the ground that he chooses to take different view of the said facts or he chooses to form a different opinion on an interpretation of the facts disclosed by the petitioner. No other arguments were advanced on behalf of the petitioner and I have to place on record that no arguments had been advanced as to the invalidity or illegality of section 297(2) or 297(2)(d)(ii) of the Income-tax Act, 1961, as mentioned in grounds (h), (i) and (j) of paragraph 15 of the petition. Mr. S. Mukherjee, learned counsel for the respondents, does not dispute the proposition of law contended for by Mr. Pal. He also does not dispute that, in the instant case, the Income-tax Officer has sought to exercise his jurisdiction under section 147(a) of the Income-tax Act 1961. He fairly concedes that, if it be held that there has been no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the Income-tax Officer will have no jurisdiction to reopen the assessment proceeding and this rule will have to be made absolute. He, however, contends that there has been failure or omission on the part of the petitioner to disclose fully and truly all material facts and the Income-tax Officer in the instant case is perfectly justified in reopening the assessment of the petitioner for the assessment year 1961-62. Mr. Mukherjee has also referred to the decision of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta, and he has relied on the following observations of the court at page 201 of the report :

'The position, therefore, is that if there where in fact some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have a material bearing on the question of under assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under the section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non-disclosure of material facts would not be open for the courts investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax Officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non-disclosure of material facts.

Clearly, it is the duty of assessee who wants the court to hold that jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been such non-disclosure.'

Mr. Mukherjee has argued that in the instant case the petitioner has failed to disclose fully and truly all material facts necessary for the assessment and, according to Mr. Mukherjee, the following are the omissions and failures on the part of the assessee :

1. The assessee failed to disclose in the return before the Income-tax Officer the receipt of Rs. 1,75,000 and he failed to disclose the sale in the Income-tax-assessment proceeding;

2. He has failed to disclose when the property was purchased or what was the reasonable market value of the property as on January 1, 1954; and

3. He has failed to disclose the expenses, if any, incurred in the matter of sale.

It is the argument of Mr. Mukherjee that it was the duty of the petitioner to fill in Part VII of the return and to disclose the fact of the sale, the price for which the property had been sold, the expenses that had been incurred in connection with the sale and the price for which the property had been purchased or the fair market value of the property as on January 1, 1954. He has contended that disclosure of the factum of sale in the assessment under the Wealth-tax Act is not enough and there should have been disclosure of the said fact in the income-tax assessment proceeding. He submits that though the officer concerned dealing with the assessment of the petitioner under the Wealth-tax Act and the Income-tax Act might have been the same, yet the two proceedings are completely separate and the disclosure of the factum of the sale in the wealth-tax assessment proceeding cannot and does not justify non-disclosure of the said fact in the income-tax proceeding. He contends that even if it be held that there was the disclosure of the factum of sale, as the fact of sale had been communicated to the very same officer, the price for which the property had been purchased or the fair market price of the property as on January 1, 1954, cannot be said to have been disclosed, as the said fact had not been mentioned even in the wealth tax assessment proceeding. According to the Mr. Mukherjee, the price for which the property had been originally purchased by the petitioner or the fair market value of the property as on January 1, 1954, are primary facts which the petitioner was bound to disclose and non-disclosure of the purchase price or the fair market price as on January 1, 1954, are clear omissions or failure on the part of the petitioner within the meaning of section 147(a) of the Income-tax Act, 1961. He argues that the purchase price of the property and the fair market price as on January 1, 1954, are primary and essential facts in the absence of which it is not possible for the officer concerned to make any assessment as to whether there has been any capital gain or not. He also argues that the duty of the petitioner to disclose the expenses that had been incurred by the petitioner in the matter of the sale, as, only in the event of the such expenses being disclosed, the officer concerned would be in the position to verify or scrutinize the same. Mr. Mukherjee has further contended that in the instant case there also appears to be discrepancy with regard to the price at which the property had been sold. Drawing my attention to the assessment order, he argues that it appears therefrom that the sale price had been stated to be Rs. 1,70,000, whereas the actual sale price is now found to be Rs. 1,75,000. On the basis of this facts he submits that there had been failure or omission on the part of the petitioner to disclose truly and fully all material facts and there are, in fact, reasonable grounds for thinking that there had been non-disclosure as regards primary facts which would have a material bearing on the question of the assessment of the petitioner. He has further submitted that in the circumstances when the Income-tax Officer assumed jurisdiction to reopen the assessment of the petitioner, the officer concerned had some prima facie grounds for thinking that there had been some non-disclosure of material facts; and it is not open to the court investigation whether this grounds were adequate or not for arriving at the conclusion that there was a non-disclosure of material facts.

The legal position to my minds appears to be quite clear. It is well-settled that before any reassessment proceeding can be initiated, the conditions procedent laid down in section 147 of the Income-tax Act, 1961, must be satisfied; and unless the conditions precedent mentioned in the said section 147 are fulfilled, the Income-tax Officer will have no power or jurisdiction to reopen the assessment of the petitioner. The section itself is unambiguous and the decision of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta, settles the position. The other decisions cited reiterate, as they must, the same principle laid down by the Supreme Court and deal with the application of the said principle in the particular facts and circumstances of those cases. I, therefore, do not consider it necessary to deal with the other cases cited by Mr. Pal at any length.

In the instant case it is not disputed that the Income-tax Officer has purported to exercise his jurisdiction under section 147(a) of the Income-tax Act, 1961. For proper and lawful exercise of the jurisdiction and power to reopen the assessment, it is essential that the conditions laid down in the said section 147(a) must be satisfied. It is the case of the respondents that the jurisdiction under the said section is properly attracted, as the petitioner has failed or omitted to disclose truly and fully all material facts necessary for his assessment. It is to be noted that this is the only ground on the basis of which the Income-tax Officer seeks to invoke and exercise his jurisdiction and power to reopen the assessment of the petitioner in the instant case and there is no dispute that petitioner had duly submitted his return under section 139 for the assessment in question. What constitutes a material fact depends on the facts and circumstances of each particular case. In considering the words 'omission or failure to disclose fully and truly all material facts necessary for his assessment' used in the section, the Supreme Court in the case of Calcutta Discount Company Ltd. observes at page 200 :

'It postulates a duty on every assessee to disclose fully and truly all materiel facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on the disclosure by the assessee or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be.'

The question which requires consideration in the instant case is whether, in the facts and circumstances, there has been any failure or omission on the part of the petitioner to disclose the primary facts necessary for his assessment, justifying the exercise of the jurisdiction of the officer concerned under section 147(a) of the Income-tax Act, 1961. In the letter dated March 23, 1966, of the Income-tax Officer to the petitioner (which has already been set out), the officer concerned relies on the following grounds to justify his action :

1. Omission to fill in Part VII of the income-tax return,

2. informing the Income-tax Officer at the time of the wealth-tax assessment that the sale price of the house was Rs. 1,70,000, and

3. thirdly, his belief from information available that the value of the property as on January 1, 1954, will be less than Rs 1,70,000.

In the affidavit filed in this proceeding by the Income-tax Officer no other ground has been mentioned.

The first ground, namely, that petitioner has not filled in Part VII of the return, relied on by the Income-tax Officer is, to my mind, without any substance, There appears to be no obligation on the part of any assessee to fill in the said part; particularly when the assessee believes that there is no question of any capital gain, there can be no need or occasion for him to fill in the said part. Not filling in the Part VII of the return by the petitioner does not, in my view, amount to any failure or omission within the meaning of section 147(a) of the Income-tax Act, 1961.

The next ground relied upon by the Income-tax Officer, namely, that the Income-tax Officer was informed at the time of the wealth-tax assessment that the sale price was Rs. 1,70,000 whereas, in fact, the sale price was Rs. 1,75,000, is not borne out by the materials on record and has no justifiable basis. The letter dated July 6, 1960, addressed by the petitioner to the Wealth-tax Officer mentions that the petitioner was selling the property for about Rs. 1,75,000 (gross). The receipt of this letter which has been annexed to the supplimentary affidavit affirmed by the petitioner on August 8, 1966, is not admitted by the respondents; and it is the contention of the respondents that no such letter appears in the file. In the facts of this case I have no hesitation in accepting the categorical statements made by the petitioner in his affidavit affirmed on August 8, 1966, and in holding that the said letter has been duly made over by the petitioner to the officer concerned. The wealth-tax assessment order, to my mind indicates, that at the time of the wealth-tax assessment, the sale of the property by the petitioner must have been discussed and Rs. 1,70,000 must have been considered to be the net sale proceeds after taking into consideration the costs, charges and expenses incidental to the sale and the sale price mentioned in the said wealth-tax assessment order represents the net price. In any event, in view of the said letter dated July 6, 1960, addressed by the petitioner, I am unable to hold that the petitioner had represented to the Income-tax Officer or informed him that the property was sold for Rs. 1,70,000. It is to be noted that the relevant time the officer dealing with the petitioners assessment under the Wealth-tax Act and the Income-tax Act was one Mr. N.C. Khasnabis and the officer seeking to reopen the assessment was no-where on the scene.

The other ground on which the respondents very strongly rely, is that according to information available the value of the property as on January 1, 1954, would be very much less than Rs. 1,70,000. This ground cannot, to my mind, justify the exercise of jurisdiction under section 147(a) of the Income-tax Act, as, in my view, it is a matter of opinion and inference of the officer concerned. The present officer may reasonably be entitled to his view as to the valuation of the property, but his view or opinion on the question of valuation of the property, in the absence of any failure or omission on the part of the petitioner, cannot empower him to exercise the jurisdiction to reopen the assessment of the petitioner. Mr. Mukherjee, the learned counsel for the respondents, has very strenuously contended that the purchase price or the fair market price of the property as on January 1, 1954, is a primary fact and it was incumbent upon the petitioner to disclose the same. It is the contention of Mr. Mukherjee that in the case where the question of the capital gain may be involved, the assessee must disclose not only the fact of sale and the sale price, but he must also disclose the purchase price or the fair market price as on January 1, 1954, and the expenses incidenal to the sale. He has argued that these are all basis or primary facts absolutely material for the purpose of assessment. He has submitted that these facts have not been disclosed, the Income-tax Officer is competent to exercise the jurisdiction under section 147(a) , to reopen the assessment of the petitioner.

There appears to be a good deal of force in the contention of Mr. Mukherjee that in any case of assessment in which the question of the capital gain may be involved, it is the duty of the assessee not only to disclose the factum of the sale and the sale price but also to disclose the purchase price or the fair market price of the property as on January 1, 1954, and expenses incidental to such sale. I agree with the contention of Mr. Mukherjee that in any such case of assessment involving the question of capital gain, the fact of sale, the price at which the property has been sold, the price at which the property has been acquired by the assessee or the fair market price of the property as on January 1, 1954, and the costs, charges and expenses of and incidental to the sale are all primary facts and relevant and material for the purpose of assessment and it is the duty of the assessee to disclose all these facts.

This contention of Mr. Mukherjee, to my mind, is however, of no assistance to respondents in the facts and circumstances of this case. It is to be noted that in the instant case the Income-tax Officer has chosen to disclose the materials and the grounds on the basis of which he is seeking to exercise his jurisdiction under section 147(a) to reopen the assessment; and non-disclosure of the purchase price or the fair market price as on January 1, 1954, and of the expenses incurred, is not any of the grounds relied on by the Income-tax Officer. In the facts and circumstances of this case and on the material on record, I am unable to hold that this facts have not been disclosed by the petitioner at the time of his assessment. It has been the case of the petitioner that he has disclosed all material facts at the time of his assessment. Either in the letter of the Income-tax Officer dated the 23rd of March, 1966, or in his affidavit filed in this proceeding, it has nowhere been stated that these facts have not been disclosed by the petitioner. The order of assessment, which was passed by another Income-tax Officer, clearly records at the time of making the assessment the petitioner appear personally and has produced evidence and said the officer has discussed the case with the petitioner. In the absence of any case made on behalf of the respondents at any stage and in the absence of any allegation in the letter or in the affidavit that the petitioner has failed or omitted to disclose these primary or basis facts at the time of his assessment, I do not consider it will be right or proper for me to presume that these facts had not been disclosed or discussed at the time when the assessment of the petitioner was made by the officer. I am, therefore, unable to hold in the facts and circumstances of this case that there has been any failure or omission on the part of the petitioner to disclose any primary or basic fact.

In the result, I must hold that the conditions laid in section 147(a) of the Income-tax Act are not satisfied, as no failure or omission on the part of petitioner to disclose any basic or primary facts is established in the instant case. It must, therefore, follow that in the instant case the Income-tax Officer has no power or jurisdiction to reopen the assessment of the petitioner.

The rule is, therefore, made absolute. There will be no order as to costs.


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