JUDGMENT Avadh Behari Rohatgi, J.
(1) These are six conjoint writ petitions under Articles 226 and 227 of the Constitution of India. In all of them the partics are the same. So are the essential facts and the questions to which they give rise. The only difference is that they pertain to different assessment years for purposes of income-tax. This judgment will govern them all.
"67 English Reports 313."
(2) First the facts. As a Hindu undivided family the petitioner firm M/s. Chiranji Lal Ramji Dass was carrying on business as commission agents. This family firm remained joint in status and business up to November, 13, 1955 when as a result of a partial partition the business assets were divided among the coparceners. up to the assessment year 1956-57 the family was assessed in the status of HUF. Thereafter the profits arising from the business were assessed in the status of a registered firm. The petitioner firm was the commission agent of Ganesh Floor Mills and were working as such at various places In and out of Delhi.
(3) The Central Bureau of Investigation raided the premises of the petitioner firm on January 19, 1965, at various places and during the search books of account and documents, apart from cash and jewellery, were seized.
(4) The relevant assessment years are 1949-50 to 1955-56.
(5) For the assessment year 1949-50 the income-tax officer, central circle Iii, Delhi on March 21, 1966 issued a notice under s. 148 of the Income-tax Act of 1961 (the Act) to the petitioner.
"WHERE As I have reason to believe that your income chargeable to tax for the assessment year 1949-50 has escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961.
1. Therefore, propose to reassess/re-compute the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income in respect of which you are assessable for the said assessment year.
2.This notice is being issued after obtaining the necessary satisfaction of the Central Board of Revenue."
(6) For the subsequent assessment years the income-tax officer issued identical notices under s. 148 on January 4, 1967 (annexure B in each of the writ petitions) . The word "re-compute" does not appear in them. This is the only difference, if it can be called a difference at all.
(7) On receipt of the above notices the petitioner field in each case a return staling that notice under s. 148 was illegal and no income had escaped assessment. The petitioner asserted that its income was the same as assessed originally. In a separate communication the petitioner firm demurred and said that the return was being filed 'under protest and that notice under s. 148 was barred by time.
(8) As regards the assessment year 1949-50 the petitioner filed a writ petition on September 27, 1966, challenging the validity of the notice under s. 148. This was writ petition No. 782-A/D of 1966. For the subsequent years 1950-51 to 1955-56 six writ petitions were brought on March 3, 1970. These are Civil Writ Petitions Nos. 228 to 233 of 1970.
(9) The writ petition for the assessment year 1949-50 (C. W. P. No. 782-A/D of 1966) was decided by H. R. Khanna J. (as he then was) on March 24, 1969. He accepted the petition and quashed notice dated March 21, 1966, under s. 148 of the Act issued by the incometax officer. He also awarded costs to the petitioner firm.
(10) Against the order of H. R. Khanna J. the respondents appealed to the Letters Patent Bench (LPA No. 41 of 1969) . On January 28, 1976, the Bench (T. V. R. Tatachari Cj and P. S. Safeer J.) affirmed the order of the learned single judge and dismissed the appeal leaving the parties to bear their own costs. (See The Income-tax officer v. Chiranji Lal Ramji Dass, 1976 Rajdhani L. R. 358(1) . This is the history of C. W. P. No. 782-A/D of 1966.
(11) The other six writ petitions brought in 1970 were not heard as the decision of the Letters Patent Bench was being awaited and it was thought by the counsel for the parties-and it was so stated and recorded-that similar questions were involved in these six writ petitions as in C.W.P. No. 782-A/D of 1966. After the decision of the Letters Patent Bench C. W. P. Nos. 228 to 233 of 1977 were set down for hearing before me.
(12) In C. W. P. No. 782-A/D of 1966 the respondents imp leaded were the income-tax officer (respondent No. 1) , the commissioner of income-tax (respondent No. 2) , Central Board of Direct Taxes (respondent No. 3) and the Union of India through Secretary, Ministry of Finance (respondent No. 4) . In other writ petitions, that is, C. W. 228 to 233 of 1970, income-tax officer, Commissioner of Income-tax and Central Board of Direct Taxes were the three respondents. The fourth respondent is the Director of Inspection (Investigation) New Delhi.
(13) Mr. A. K. Sen on behalf of the petitioner has raised two principal contentions before me. In the first place he has argued that the order of H. R. Khanna J. dated March 24, 1969, in C. W. P. No. 782 A/D of 1966 which on appeal was affirmed by the Letters Patent Bench on January 28, 1976, constitutes res judicata for the subsequent assessment years which form the subject-matter of the present six writ petitions.
(14) What did H. R. Khanna J. decide in C. W. P. No. 782-A/D of 1966 between these very parties ? This we must know, before we can see whether the doctrine of conclusiveness of judgments or .estoppel by judgment applies in these cases. The, principal question to which the learned judge addressed himself was this : Was there any material on the basis of which the income tax officer could have formed the belief that income had escaped assessment in the assessment year 1949-50 because of the omission or failure on the part of the assessed to disclose fully and truly all material facts ? On this question his conclusion was that "THERE evenue has failed to show any material on the basis of which the Income-tax Officer could form a belief that it was due to omission or failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment that income had escaped assessment during the assessment year 1949-50."
In the course of his judgment he said :
"IN the present case I find that although Shri V. S. Rastogi Income-tax Officer in his affidavit has asserted that notice under Section 148 was validly issued on the basis of information coming to the possession of the Income-tax Officer that by reason of omission or failure on the part of the assessed to disclose fully and truly all material facts necessary for the assessment income chargeable to tax had escaped assessment for the assessment year 1959-60", he has no where indicated the material on the basis of which he could form the belief that there had been omission or failure on the part of the assessed to disclose fully and truly all material facts necessary for the assessment for the year 1949-50. The affidavit filed on behalf of the respondent is absolutely silent in this respect and in the absence of such a material it is difficult to hold in favor of the respondents about the existence of such a belief. In any case it cannot be said that the belief was held by the Income-tax Officer in good faith and was not merely a pretence, because the court can go into this matter only if the reasons for such a belief are placed before the Court."
(15) Before the learned single judge the revenue raised an argument that it was not necessary for the income-tax officer to refer to any material in his affidavit because such material was indicated by notices which were issued in that case by the income-tax officer to the petitioner under s. 143(3) of the Act. The judge rejected this argument.
(16) In short the learned single judge held that the respondents on whom the onus of proof lay had utterly failed to show that there was any material on the basis of which the income-tax officer could have formed the belief that the income had escaped assessment because of the omission or failure on the part of the assessed to disclose fully and 'truly all material facts. He, therefore, quashed the notice, as I have said.
(17) In these six writ petitions Nos. 228 to 233 of 1970 the respondents have now given reasons for initiating proceedings under s. 148. ' The reasons set out by the income-tax officer pertain to the assessment year 1949-50. As regards the assessment year 1950-51 it is said that "REASONS have been related in detail in the note submitted with the proposal for the year 1949-50 on 19-2-1966. The escapement for this year of assessment is estimated as below on the basis of similar study of the seized material:- (i) Bogus Credits . . . . . Rs. 6,21,434 (ii) Unaccounted money utilised in Business Rs. 5,74,054 (iii) Unaccounted transactions . . . Rs. 60,000 Rs. 12,55,988 (Estimated escaped income after giving benefit of rotation of Rs. 5 lakhs.) "
(18) Similarly for each of the subsequent assessment year the escaped income is estimated on the basis of "similar study" of the seized material at Rs- l,00,000.00 and above. The Revenue, as I have said, has given reasons in these six writ petitions. To those reasons I shall return a little later.
(19) The question is : Notwithstanding the reasons good, had or indifferent whatever they may be-will not the judgment of H. R. Khanna, J. dated March 24, 1969, operate as a res judicata to a hearing of these six writ petitions ? Counsel for the petitioner contends that that judgment is conclusive and it is not open to the Revenue to reagitate the same-question overagain, Mr. T. A.Ramachandran, on behalf of the Revenue, contends that the doctrine of res judicata will not apply as earlier decision was not on merits, and is therefore not binding for future years.
(20) Now it is clear that the parties are the same in these cases as before Khanna J. though the assessment years are different in each case and the estimate of escaped income varies for each year. But the principal question for decision in these cases as before Khanna J. is the same. Was there any material before the income-tax officer such as to enable him to form a belief (1) that the income had escaped and (2) that the escaped income was the result of the assessed's omission and failure to disclose fully and truly all material facts ?
(21) It must not be forgotten that reasons were there in existence even at the time of the issue of notice dated March 21, 1966 under s. 148 of the Act in the case before Khanna, J. The reasons are dated February 19, 1966. The Revenue cannot dispute this as it is their own case. For reasons best known to the Revenue they were not shown to Khanna J. He was invited to hold on the basis of the notices under s. 143(3) that there were reasons. He declined so to hold. Reasons of 1949-50 are the very reasons for the subsequent years. Income-tax officer says so. In respect of the assessment year 1949-50 there is a conclusive finding that there was no material before the Revenue in respect of that year. The reasons being the same for all subsequent years, I think the doctrine of res judicata applies. That s. 11, Code of Civil Procedure applies to thewrit petitions is now no longer in doubt. It is settled that the decision on an issue of law fundamental to the case is binding on the parties and a fresh litigation cannot be started upon a different assumption of facts or law. The parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. This principle of law, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the Judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. The same principle of setting parties' rights to rest applies and estoppel occurs. There would be no quieting of litigation unless the judgment was taken as it stands.
(22) Since the classic judgment of Sir Williams De Grey Cj in Ductchess of Kingston's case (1776) 2 Smith L. C. 754 (1-A) the principles of law governing estoppel per rem judicatam inter parties are generally repeated in the form he expounded and is now embodied in s. 11 of the Code of Civil Procedure in India. If in any court of competent jurisdiction a decision is reached, a party is estopped from questioning it in a new legal proceeding. This principle extends to any point whether on fact or law, which was in substance the ratio of and fundamental to the decision. The rule on this subject was set forth in the leading case of Henderson v. Henderson * (1843) 3 Hare 114(2) by Wigram V. C. as follows :
"I believe I state the rule of the Court correctly when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadevertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."
(23) In short the present point of "reasons" was one which, if taken, went to the root of the matter on prior occasions, so that its omission was not more default in pleading but a real attempt to divide one argument into two and to multiply litigation. The question of reasons was not merely incidental or collateral to the question decided on earlier occasions. It was fundamental to it.
(24) Counsel for the Revenue says that each assessment year is an independent year and therefore the decision on the assessment year of 1949-50 must be confined to that year alone. In this connection he referred me to Broken Hill Proprietary Co. Ltd. v. Broken Hill Municipal Council (1926) Ac 94(3) where the plea of res judicata was rejected and it was held that a decision on liability to assessment to tax for one year is not conclusive of liability to assessment in a later year. The Judicial Committee said :
"THE decision of the High Court related to a valuation and a liability to tax in a previous year, and no doubt as regards that year the decision could not be disputed. The present case relates to a new question namely, the valuation for different year and the liability for that year. It is not eadem quaestio, and therefore the principle of res judicata cannot apply."
*67 English Reports 313.
(25) The counsel said that the other decision of the Privy Council of the same year by a differently constituted Board in Hoystead v. Commission of Taxation 1926 Ac 155(4) taking a contrary view has not been preferred to Broken Hill's case by the Supreme Court of India. "It is well settled" the Supreme Court has said :
"THAT in matters of taxation there is no question of res judicata because each year's assessment is final only for that year and does not govern later years, because it determines only the tax for a particular period."
(Installment Supply P. Ltd. v. Union of India .
(26) This view was reiterated in New Jahangir Vakil Mills Co. Ltd. v. The Commissioner of Income-tax, Bombay, .
(27) It is true that in England Hoystead and Broken Hill cases were considered in Society of Medical Officers of Health v. Hope, 1960 A. C. 551 (H. L.) (7) and Gaffoor v. Income-tax Commissioner 1961 A. C. 584 (PC) (8) and the decision in Broken Hill's case was approved and followed. In view of this the authority of Hoystead's case has been considerably shaken and "it is impossible to treat Hoystead's case as constituting a legal authority on the question of estoppels in respect of successive years of tax assessment." (Gafoor v. Income-tax Commissioner, supra per Lord Radcliff) .
(28) An assessment is inherently of a passing nature. All that is determined by an assessment order is the amount of tax to be paid for the particular year, upon the facts before the income-tax officer for that particular year. There is no Us or controversy between the income-tax officer and the assessed. Hence, it is difficult to attribute to an assessment a permanence so as to provide an estoppel by resjudicata (see C.I.R. v. Sneath, 17 T. C. 149, 168 (CA) (9) . The assessment for a defined and terminable period has none of those considerations that are critical to the issue of estoppel. It is limited in the sense that its function begins and ends with that of deciding what is to be the assessment for that year. "The critical thing is" Lord Radcliff has said :
"THAT the dispute which alone can be determined by any decision given in the course of these proceedings is limited to one subject only, the amount of assessable income for the year in which the assessment is challenged."
(Gaffoor v. Income Tax Commissioner, 1960 A. C. 584 (598) .
(29) In Society of Medical Officers of Health v. Hope (supra) Lord Radcliff said :
"THE system of rating involves certain considerations that are special to itself. Its nearest analogy is with the system of annual personal taxation. With regard to both one has to begin by recognising that there is high and frequent authority for the proposition that it is not in the nature of a decision given on one rate or tax that it should settle anything more than the bare issue of that one liability and that, consequently it cannot constitute an estoppel when a new issue of liability to a succeeding year's rate or tax comes up for adjudication. The question of this liability is a "new question". It is not "eadem quaestio". The "cause of action is different". "The subject-matter is a different year's tax and a different year's assessment and is not the same as the subject-matter 'of the previous ruling'."
(30) That applies to Income-tax authorities under the Act or valuation officers under the rating law. Their direct function is fixing the assessment. The jurisdiction of these tribunals to which the decision belongs by the administrative scheme is a limited one. These are not courts to decide general questions of law. In Society of Medical Officers of Health v. Hope (supra) Lord Radcliff said :
"FOR that limited purpose it is a court with a jurisdiction competent to produce a final decision between the parties before it; but it is not a court of competent jurisdiction to decide general questions of law with that finality which is needed to set up the estoppel per rem judicatam that arises in, certain contexts from legal judgments."
(31) The point of distinction between cases of assessment and the present writ decision is this: in assessment cases there is no lis, the income-tax officer is not a party in the sense of a party hostile to the writ petitioner and the tribunal is a tribunal of limited jurisdiction ; in the writ petitions there is a lis, there are parties to the writ-the assessed on the one side and the Revenue on the other-and the court dealing with the general question of law is a court of competent jurisdiction. The point involved' before Khanna J. was a question of law. He decided it in favor of the assessed. Though that writ petition was limited to the assessment year 1949-50 the question involved is common to all the seven writ petitions for reasons of the income-tax officer are common. The cause of action is not different. The question is not a "new question" in each year. It is "eadem quaestio" (the same question) . Here estoppel arises from the decision of a court of competent jurisdiction where not merely there was a Us but a lis inter-parties.
(32) The plea of res judicata is a fundamental doctrine based on the view that there must be an end to litigation. Where a question has been decided by a court of competent jurisdiction in a lis inter parties those parties are estopped from reopening the same question in subsequent proceedings between themselves. But the decision must be a decision of a court of competent jurisdiction. The income-tax authorities are not properly courts. The question before them is of liability for a particular year. Their decisions can change in a different year's tax and a different year's assessment. The subject-matter is different. The cause of action is different. But it is not so with the decisions of courts. That is a domain where principles of estoppel and res judicata apply.
(33) There is yet another answer to the Revenue's contention. If reasons in the subsequent years are those of 1949-50 and the Revenue has invited the court to give a decision on the power of the incomelax officer to take action under s. 148 and now that the decision has gone against the Revenue, they cannot go back on it and contend the contrary in subsequent years. Whether reasons were actually disclosed to the Court or they were withheld is of little moment. Reasons were there when Khanna J. decided the case. The doctrine of constructive res judicata will apply for the Revenue "might" and "ought" to have disclosed the reasons (Expl. Iv to S. 11. Code of civil Procedure) and they cannot now reagitate the question by disclosing reasons at their sweet will in subsequent cases. Hoystead's case establishes it. Speaking of that decision Lord Radcliff said :
"THE case stands as an authoritative contribution to the rule that in matters of estoppel what might have been said may be as important as what was actually said, and that, as between the parties themselves, law may indeed be formed sub silentio."
(Society of Medical Officers of Health v. Hope, supra at p. 566) .
(34) In these cases the assessment years are incidental. The principal question of law is the validity of the notices under s. 148 of the Act which admittedly are the same in all cases and were issued for the same set of reasons. That the estimated escaped income was fluctuating from year to year i.e. from 1949-50 to 1955-56 is also not determinative of the main question of the validity of notice.
(35) The assessment year of 1949-50 was taken to be the base year. The writ concerning that year was taken by the parties to be a test case. The principles touching the assessed were settled therein (Tribune Trust Lahore v. Commissioner of Income Tax . Punjab, (1944) 12 Itr 370 ( 3 85) (10) . Those ought to bind the parties in future litigia,tion.
(36) On this point the learned authors of Whitman and Wheatcraft on Income Tax and Surtax (1971) ed. at p. 840 say :
"IT is possible that where there has been a decision by the courts on a question of law on a previous occasion the point raised could not be litigated again."
(See Hood-Barrs v. I.R.C. (1960) 39 Tc 208(11) per Lord Evershed M.R.) .
(37) My conclusion on the first point is, therefore, that the Revenue is estopped and the decision of Khanna J. dated March 24, 1969, in C.W. No. 782-A/D of 1966 which was affirmed on appeal operates as a bar on the principles of res judicata.
(38) These cases have a prologue and an epilogue. After the raid of January 19, 1965, the income-tax department took possession of books and articles from C.B.I, on November 19, 1965. On February 17, 1966, the income-tax officer acting under s. 132(5) of the Act of 1961 included a sum of Rs. 50,00,000 on account of the income alleged to have been earned and kept undisclosed by the petitioner.
(39) Against the order of the income-tax officer passed under s. 132(5) the petitioner filed objections before the Central Board of Direct Taxes under s. 132(11) wherein the propriety of the inclusion of Rs. 50 lacs was challenged.
(40) Shri G. S. Srivastava, Member of the Central Board of Direct Taxes allowed the objections on 9/11th August, 1966 under s. 132(12) . He sustained the order of the income-tax officer to the extent of Rs. 27.875.00 only as against the total income of Rs. 51, 54, 020.00 which included Rs. 50 lacs on account of the so called unaccounted money from undisclosed sources. The tax demand of Rs. 2,19,349.00 which was created on the basis of Rs. 51,54,020.00 was reduced to the sum of Rs. 207.00 only. Seized jewellery was released. This is the prologue.
(41) On February 19, 1966 the income-tax officer submitted a proposal to the Central Board of Direct Taxes for reopening the assessments. He gave his reasons.
(42) January 4, 1967, the income-tax officer issued notice under s. 148 for all the six assessment years after taking the approval of the Central Board of Direct Taxes to start proceedings under s. 147(a) . This was done within the time limit of 16 years under s. 149. No further proceeding was taken in these cases in view of the pending writ petition (782-A/D of 1966) in respect of assessment year of 1949-50 which was decided on March 24, 1969, as we have seen.
(43) On March 3, 1970, the petitioner brought six writ petitions challenging the notice under s. 148. On March 5, 1970, the petitions were admitted. An order of stay of proceedings was made.
(44) In September, 1970 the income-tax officer made his counter affidavit. At this stage he gave reasons. It is a long statement. It reads :
"BRIEF reasons for initiating proceedings u/s 147. A raid was carried out by the Central Bureau of lnvestigation/ E.O.W., Delhi Bench on 19-1-65 at the various premises belonging to M/s. Chiranjilal Ramjidass, Bhiwani and connected cases and books of a/c and documents apart from cash and Jewellery were seized. During the a/c year relevant to assessment year 1949-50 the H.U.F. was the sole agent of Vegetable Ghee manufactured by Ganesh Flour Mills Ltd., Delhi. The H.U.F. had office at Bhiwani and branches at Delhi, Hazari Bagh, Narnaul and Bikaner. In the course of search by the C.B.I., some Uchanti Babies have been recovered which indicate the original entries made in the course of the carrying out of the business. A comparison of these Uchanti Babies with the corresponding Official books of accounts, which appear to be duplicate, show that some of the transactions recorded in the original Uchanti Babies do not find place in the Official (duplicate) books. They also indicate that the rates charged in respect of certain transactions are higher as per Uchanti Bahi than the rates shown and accounted for in the Official (duplicate) books. There is also evidence to show that sales were suppressed by showing lower rates in the vouchers. For this purpose the vouchers showing lower rates of sale were prepared in the names of bogus parties whereas the sales were actually made in the black market at higher rates. The on money thus charged remained unaccounted for in the books. Besides, there is evidence of benami business carried on mostly in the names of trusted employees. It may also be noted that there are several remittances of drafts through banks in respect of which the entries in the relevant cash Book have not been made on the date of remittance, because the cash available was not sufficient. Such entries have been made on later dates when cash was available. It clearly shows that assessed used Undisclosed income for making the remittances. A comparison of the books of accounts of the assessed with those of Ganesh Flour Mills Ltd. Delhi has revealed considerable discrepancies. It has also come to notice that the assessed has introduced bogus credits in the names of non existing parties or by recording fictitious transactions. A substantial portion of these credits have not been ledgerised with a view to avoiding the detection of these transactions. The manipulations notices in the a/c for the previous year relevant to assessment year 1949-50 may be summarised as under:- (1) Bogus credits . . . . . Rs. 9,12,996 (2) Unaccounted money utilised for payments to M/s. Ganesh Flour Mills Ltd. Rs. 4,40,908 (3) Unaccounted transactions . . . Rs. 60,350 Total . . . . . . Rs. 14,14,254 It is clear that behind the manipulated entries of about Rs. 14 lakhs, there is suppressed income of running into lacs. Even after giving the benefit of rotation I estimate escaped income at about Rs. 10 lakhs. In view of the foregoing I have reasons to believe that by reason of the omission or failure to disclose fully and truly all material facts necessary for its assessment for Assessment year 1949-50, income chargeable to tax has escaped assessment for that year within the meaning of s. 147(a) of I.T. Act 1961. C.B.D.T.'s approval u/s 151 of I.T. Act, 1961 is solicited before notice u/s 148 ibid is issued."
(45) On April 1, 1970, S. Rangarajan J. vacated the stay of assessment proceedings as the assessments were getting barred. Thereafter assessments were made in each of the six cases. The results of the assessment are quite revealing. The facts of the case are best allowed to speak for themselves. The following statement will show at a glance the income) assessed as per assessment originally made u/s 23(3) of Incometax Act, 1922, income alleged to have escaped assessment as per proposal made by the Income-tax Officer for re-opening assessment u/s 147(a) . Income assessed u/s 143(3)/147 and alleged income which escaped assessment according to the Income Tax Officer included in the order of re-assessment passed under section 147(a) . Asstt. Income assessed Income alleged to Income Alleged year as per assess- have escaped asses- assessed income ment originally sment as per proposal u/s which made u/s 23(3) made by the I.T.O. 143(3) / escaped 147 assessment including in the order of reassessment passed u/s 147(a) Rs. Rs. Rs. 1950-51 . 45,496 Rs. 12,55,988 1,50,476 1,11,134 (after giving benefit of rotation Rs. 5,00,000) 1951-52 . 10,063 Rs. 6,13,712 16,291 7,228 (after giving benefit of rotation Rs. 2,00,000) 1952-53 . 6,731 Rs. 3,48,453 12,323 5,592 (after giving benefit of rotation Rs. 1,00,000) 1953-54 . 5,747 Rs. 2,81,135 56,087 7,100 (re-assessed (after giving benefit u/s 34 at of rotation Rs. 50,759 on Rs. 1,00,000) settlement) . 1954-55 . 41,338 Rs. 12,13,795 80,265 37,550 (re-assessed (after giving benefit u/s 34 at of rotation Rs. 46,715) Rs. 3,50,000) 1955-56 . 22,629 Rs. 3,15,512 55,734 3,100 (re-assessed u/s 34 (after giving benefit at Rs. 56,024) of rotation Rs. 1,00,000) This is the epilogue.
(46) To return to the reasons. The income-tax officer has heavily relied upon the uchanti bahi. This uchanti bahi which was seized in the raid relates only to the assessment year 1954-55 and 1955-56. The uchanti bahi starts from June 25, 1952, and ends on November 5, 1953. In the assessment year 1954-55 only Rs. 5144 were included on the basis of this bahi after reopening the assessment. In respect of the assessment year 1955-56 only Rs. 500 were included in the order of assessment. The vouchers and books seized in the said raid were not referred to in the assessment orders.
(47) It is surprising that reasons for all the years are the same. This is the Revenue's admitted case. How can the reasons be the same for all years ? This is beyond comprehension. The mind fails to grasp it. After all facts and circumstances differ from year to year. The business transaction will also differ.
(48) Mr. Sen's second argument is founded on the reasons given by the income-tax officer. His submission was firstly that the reasons do not indicate the material on which they are based. Secondly he said that the reasons do not indicate assessed's omission or failure to disclose fully and truly all material facts.
(49) There is a wealth of case law on reassessment under s. 147 and 148 of the Income-tax Act of 1961. But here it is enough to refer to a very recent decision of the Supreme Court in I.T.O. v. Lakhmani Mewal Das (1976) 103 Itr 437.
(50) Two conditions have to be satisfied before an income-tax officer acquires jurisdiction to issue notice under s. 148, viz., (1) the income-tax officer must have reason to believe that income chargeable to tax has escaped assessment, and (2) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the Part of the assessed to disclose fully and truly material facts necessary for the assessment for that year.
(51) Both these conditions must co-exist in order to confer jurisdiction on the income-tax officer. It is also imperative for the incometax officer to record his reasons before initiating proceedings as required by s. 148(2) .
(52) The grounds or reasons which led to the formation of the belief contemplated by s. 147(a) of the Act must have a material bearing on the question of escapement of income of the assessed from assessment because of his failure or omission to disclose fully and truly all material facts. As H. R. Khanna J. said :
"THE expression "reason to believe" does not mean a purely subjective satisfaction on the part of the income-tax officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the income tax officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law."
(53) Khanna J. went on to say :
"RATIONAL connection postulates that there must be a direct nexus or live link between the material coming to the notice of the income tax officer and formation of his belief that there has been escapement of the income of the assessed from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the income tax officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, however, vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessed from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence."
(54) In my opinion the live link or close nexus which should be there between the material before the income tax officer and the belief which he was to form regarding the escapement of the income of the assessed from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in 'this case. The income tax officer could not have had reasons to believe that by reason of the assessed's omission to disclose fully and truly all material facts necessary for his assessment for the accounting years in question income chargeable to tax has escaped assessment for these years.
(55) The reasons and the material on which they are based are vague, indefinite, far-fetched, remote and fanciful. It is nowhere stated what are those primary facts of which the assessed was guilty in not making a true and full disclosure one would ask ? As Khanna J. said:
"THE duty of the assessed in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends."
(56) To me it seems to ire a case of surmises and suspicions. The prologue is indicative of it. Counsel for the Revenue said that I should turn a blind eye to what happened in the objections before the Board and what transpired subsequently in assessment proceedings. It is true that assessment orders passed subsequently cannot be taken into account to judge the reasonableness of 'the grounds of the income tax officer. But the background and surrounding circumstances of a case and immediate proceedings preceding the issue of notice under s. 148 cannot be obliterated from consideration.
(57) Counsel said that all the reasons need not be good grounds. Even one reason is enough as held in Thanthi Trust v. Income-tax Officer, 91 Itr 261, he paid. It can be so no doubt. But that one reason should be such as to afford ground to believe that the escaped income amounts to Rs. 50,000 or more for the relevant assessment year. It must not be forgotten that the time limit of which the Revenue is taking advantage is the extreme limit of 16 years. It is quite a serious thing to reopen assessment when sixteen years are about to expire.
(58) I am not satisfied that the requirements of s. 147 and in particular of clause (a) of that section were fulfillled in the case. Therefore. the income tax officer could not have issued a notice under s. 148. "In an event" to use the words of Khanna J. in this case too : "The link was too tenous to provide a legally sound basis for reopening the assessment."
(59) I would, therefore, accept all the six petitions and quash the notice dated January 4, 1967, under s. 148 of the Income-tax Act issued by respondent No. 1. The petitioner would be entitled to costs.