ivil Appeal No 565 of 1976
629 From the Judgment and Order dated 581975 of the Bombay High Court in Special Civil Application No 429 of 1970
K Rajgopal pardeep Rajgopal Ms Rekha Rajgopal MS Ganesh and section Sukumaran for the Appellant
Dr V Gauri Shankar M Arora and Ms A Subhashini for the Respondent The Judgment of the Court was delivered by KULDIP SINGH J
The appellant company carries on the business of exporting manganese ore to England and United States of America
The Income Tax Officer Nagpur issued a notice dated March 20 1970 under Section 148 of the Income Tax Act 1961 hereinafter called the Act  stating that he had reasons to believe that the income of the appellant chargeable to tax for the assessment year 1953 54 had es caped assessment within the meaning of Section 147 of the Act
The company was called upon to show cause why it should not be re assessed to
income for the said year
The appel lant company challenged the notice by way of writ petition under Article 226227 of the Constitution of India before the Nagpur bench of the Bombay High Court
The High Court by its judgment dated August 5 1975 dismissed the writ peti tion with costs
This appeal via special leave petition is against the said judgment of the High Court
The relevant facts are hereinafter
The appellant is a non resident company having its office in London
It has its office in India at Nagpur
The appellant is assessed to income tax at Nagpur and it has been the practice of the appellant company to produce before the Income Tax Officer the relevant books which are kept by the local office at Nagpur the balance sheets the trade account and the prof it loss account from their head office in London
It ap pears that sometime in 1958 the customs authorities came to know that the appellant company had declared very low prices in respect of all the consignments of manganese ore exported by them out of India
It was also found that most of the export was only to three buyers who in turn did not purchase manganese ore from any other company except the appellant
After due enquiries investigation the custom authorities found that the appellant was systematically showing lesser value for the manganese ore exported as com pared with the prevailing market price for the same grade of manganese ore
630 The Collector Customs Visakhapatnam by an order dated March 2 1959 held that there was under invoicing by the appellant to
the tune of Rs78 lacs
The said order of the collector was however set aside in appeal and the matter was remanded to the Collector for re hearing
In the final order passed by the Collector of Customs dated November 16 1972 under invoicing was shown to the tune of about Rs4445 lacs
It is thus obvious that the custom authori ties came to the conclusion that the prices mentioned in the relevant contracts between the appellant and the buyers were lesser than the contemporaneous market prices
The custom authorities thus found as a fact that the appellant company was indulging in under invoicing
The Income Tax Officer on coming to know about the pendency of proceedings before the Collector of Customs issued a notice dated March 20 1970 under Section 148 of the Act
In the notice the reasons on the basis of which he entertained the necessary belief as required under Section 147 of the Act were not given however alongwith the return filed on behalf of the revenue before the High Court the reasons which led to the issue of notice under Section 148 on the grounds mentioned under Section 147a of the Act were disclosed
It is not disputed that the reasons need not be set out in the notice and the same can be produced before the court
Section 147 of the Act provides for assessment or re assessment in cases where income has escaped assessment
The Revenue s right to take action under the section is subject to the conditions laid down therein
The requisite condi tions provided under Section 147a at the relevant time were as under The income tax officer should have reason to believe that income has escaped assess ment by reason of omission or failure on the part of the assessee i to make return of his income under the relevant provisions of the Act or ii to disclose fully and truly all material facts necessary for his assessment for the year
SeCtion 147b of the Act on the other hand required that the Income Tax Officer should have in consequence of information in his possession reason to believe that income has escaped assessment
631 It is not disputed in the year 1970 the Income Tax Officer had no jurisdiction to issue notice under Section 148 on the grounds contained under Section 147b of the Act as the period of limitation for the issue of such notice provided under the Act had expired
There was however no bar at that point of time to issue the said notice on the grounds under Section 147a of the Act
Mr V Rajagopal Senior Advocate learned counsel for the appellant has contended that the Income Tax Officer could not have reason to believe that there was omission or failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment and that the income chargeable to tax had escaped assessment
According to him it was not the practice with the appellant to produce the account books from their head office in London before the Income Tax Officer
The appellant company produced before the Income Tax Officer the balance sheets profit and loss account and all other necessary records required for the purpose of assessment
According to the learned counsel the only material before the Income Tax Officer was the original order of the Collector of Customs wherein it was held that the appellant had indulged in under invoicing resulting in declaring lesser price than the prevailing market price
The learned counsel contended that the order of the Collector could at the most be an information within the ambit of Section 147b of the Act but it could not be the basis or the reason to entertain the belief as requires under Section 147a of the Act
The only question which arises for our consideration is whether the two conditions required to confer jurisdiction on the Income Tax Officer under Section 147a of the Act have been satisfied in this case
The first is that the Income Tax Officer must have reason to believe that the income chargeable to income tax had been under assessed and the second that Such under assessment has occurred by reason of omission or failure on the part of the assessee to dis close fully and truly all material facts necessary for its assessment for the year 1953 54
So far as the first condition is concerned the Income Tax Officer in his recorded reasons has relied upon the fact as found by the Custom Authorities that the appellant under invoiced the goods he exported
It is no doubt correct that the said finding may not be binding upon the Income Tax Authorities but it can be a valid reason to believe that the chargeable income has been under assessed
The final outcome of the proceedings is not relevant
What is relevant is the existence of reasons to make the Income Tax Officer believe that there 632 has been under assessment of the assessee s income for a particular year
We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147a of the Act was satisfied
As regards the second condition the appellant did not produce the books of accounts kept by them at their head office in London nor the original contracts of sale which were entered into at London with the buyers
The appellant did not produce before the income Tax OffiCer any of the accounts which related to the foreign buyers
No reasons Were given for the supply of manganese ore at a lower than the market rate
It is for the assessee to disclose all the primary facts before the Income Tax Officer to enable him to account the true income of the assessee
The proven charge of under invoicing per se satisfy the second condition
The appellant s assessable income has to be determined On the basis of the price received by it for the goods exported
If the true price has not been disclosed and there was underin voicing the logical conclusion prima facie is that there has been failure on the part of the appellant to disclose fullyand truly all material facts before the Income Tax Officer
We are therefore satisfied that both the condi tions required to attract the provisions of Section 147ahave been complied with in this case
Mr V Rajagopal further argued that in fact the notice was issued under Section 147bof the ACt and not under Section 147a of the Act
We are unable to accept this contention
Although the notice only mentioned Section 147 of the Act without indicating whether it was under Section 147a or 147b but the reasons recorded by the Income Tax Officer on February 26 1970 which run into more than 20 pages specifically state that the proposed action was under Section 147a of the Act
Even otherwise we are satisfied that the material on the record and the reasons recorded by the Income Tax Officer justify the issue of the notice under Section 147a of the Act
We therefore dismiss the appeal with costs which we quantify as Rs 15000
NPV Appeal dis missed


Summary:
A suit to recover money based on two mortgages was resist ed by the defendant on the plea that the mortgages were satisfied as the assignor of the mortgages to the plaintiff had executed an agreement in favour of the defendant which proved satisfaction
This agreement was not registered and the question for determination was whether it required registration and whether if it did it could not be used for the collateral purpose of proving full payment of the mort gage amount
The agreement contained inter alia the following terms i I am settling and formulating new terms and I am confirming some very terms which were de clared before iii Although the rate of interest mentioned in the mortgage deeds is 14 annas still the actual rate is to be received at the rate of 8 annas and so it is settled between the original parties iii It was agreed that if you pay me Rs 1800 in a lump it will be understood that the transaction has been wholly completed and paid up
As you have no sufficiency of funds   it is settled that you are to pay me Rs 80 per month iv As mentioned above no interest of any nature whatever has remained claimable by me  and in like manner I understand whole of the principal has been fully paid v If you so wish or if necessity may arise then at any time you may ask for it I shall give you this agreement written out on stamp paper and on being registered
 Held that the agreement was not exempt from registra tion because the document itself limited and extinguished an interest   in immoveable property in the present within the meaning of section 17 1b of the Indian Registration Act and it was not exempt under section 17 2 v
Held also that the document could not be used under the proviso to section 49 of the Registration Act as the suit was not for specific performance and no question of part performance arose in the case and also no question of using the document for a collateral transaction arose because the document was to be used to prove the very agreement which it created itself
U Po Thin vs Official Assignee AIR 1938 Rang 285 and Tikaram vs Deputy Commissioner of Bara Banki 26 IA 97 Mahim Chandra Dey vs Ram Dayal Dutta AIR 1926 Cal 170
492 Ram Ranjan vs Jayantilal AIR and Collec tor of Etah vs Kishori Lal AIR 1930 All
721 referred to