Case: Commissioner of Income Tax, Gujarat Vs. M/s. Bhanji Lavji Porbandar

done was done at Porbandar"- that the question of receipt of sale proceeds in British India was "thus bypassed"; that the Income-tax Officer was informed about the interest paid to the assessee but "no question was raised of any possible liability of the assessee to tax on other account"; that "all the statements taken together contained such a meagre presentation of the facts, that it was difficult to consider that there was a full and true disclosure of material facts"; and that "the material facts were not disclosed, whatever was disclosed was not fully disclosed, and in that sense there was no true disclosure",. The Tribunal then observed:This is not a case where the Income-tax Officer drew a wrong legal inference from facts. This is a case where facts must be regarded as not fully or truly disclosed. xxx Even so, in this case, it is mainly the assessee who failed to carry out the obligation under the law, with the result that the income escaped assessment. The words "full" and "true" and "material facts" and the Explanation to S. 34 (l) (a) would lose all their meaning it the meagre statements by the assessee were to pass muster. Under those circumstances, we must hold that the initiation of action under S. 34 (l) (a) was valid ".6. In our judgment, the High Court was right in holding that the Tribunal misconceived the nature of the proceedings and the duty imposed upon the assessee by S. 34 (l) (a).It is not for the assessee to satisfy the Income-tax Officer that there was no concealment with regard to any question; it is for the Income-tax Officer, if that issue is raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment.Failure to disclose how the delivery of ghee was given at Porbandar was wholly irrelevant, and failure to furnish particulars in that behalf cannot assist the case of the Department. Observation relating to the failure to disclose the price of ghee supplied is not strictly accurate, for, it was disclosed by the assessees representative that the cheques were delivered for payment of the dues for ghee supplied at Porbandar and that "they were subsequently transferred to Porbandar". It was again no duty of the assessee to disclose to or instruct the Income-tax Officer thatthere were "profits embedded in the receipt" of the money at Bombay. Section 34 (l) (a) does not cast any duty upon the assessee to instruct the Income-tax Officer on questions of law. The assessee had disclosed that ghee was delivered at Porbandar by him and the price in respect of those supplied was received in Bombay which was subsequently transferred to PorbandarWe are unable to accept the view of the Tribunal that the "question of receipt of sale proceeds m British India was thus by-passed". The assessees representative had expressly stated that the assessee had maintained a Bank account in British India in which "for recovering from merchants dues in respect of the goods delivered at Porbandar" were credited. The assessee also produced the Bank Pass Books. The finding that "the question of receipt of sale proceeds was by-passed" cannot be accepted as correct. The statement that the cheques were "subsequently transferred to Porbandar" only means that the amounts realized by encashment of the cheques were sent to Porbandar, and not thatthe cheques were sent to Porbandar. We do not think that any more detailed disclosure was necessary to comply with the requirements that the assessee had fully and truly disclosed all the material facts necessary for the purpose of assessment.7. The Income-tax Officer may, if he is satisfied, that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, income has escaped assessment, he may assess or re-assess the income. But when the primary facts necessary for assessment are fully and truly disclosed, he is not entitled on change of opinion to commence proceedings for re-assessment. The Income-tax Officer was apprised of all the primary facts necessary for assessment, and he proceeded to "drop the assessment proceedings". He may have raised a wrong legal inference from the facts, disclosed but on that account he was not competent to commence re-assessment proceedings under Section 34 (1) (a) for the two assessment years 1947-48 and 1948-49.8. Counsel for the Commissioner contended that in any event the assessee had in the assessment of income for the year 1949-50 not disclosed all the primary facts. Counsel contended that the statement before the Income-tax Officer was a bare statement about the receipt of interest from Messrs. Shamji Kalidas and Company and there was no reference to the account with the Bank of India Ltd. There is no substance in this contention. The assessee had invited the attention of the Income-tax Officer to the previous assessment proceedings and also had invited his attention to the fact that on the interest received tax at maximum rate was charged. In the Bank account there was no express reference. But we agree with the High Court that since the factual position having remained unaltered in the assessment year 1949-50 there was no non-disclosure of material facts necessary for assessment of the income. The income-tax Officer was fully aware of the assessment proceedings for the years 1947-48 and 1948-49, and in his order he expressly referred to those proceedings. Being aware of the earlier proceedings and the reasons for passing the previous order, if the Income-tax Officer passed an order in effect holding that there was no income of the assessee chargeable to tax, the Income-tax Officer cannot seek to reassess the income on the ground of failure to disclose fully and truly the facts necessary for assessment. We do not think that any ground is made out for disagreeing with the High Court in respect of the validity of the order of re-assessment for the Year 1949-50.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]6. In our judgment, the High Court was right in holding that the Tribunal misconceived the nature of the proceedings and the duty imposed upon the assessee by S. 34 (l) (a).It is not for the assessee to satisfy theOfficer that there was no concealment with regard to any question; it is for theOfficer, if that issue is raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment.Failure to disclose how the delivery of ghee was given at Porbandar was wholly irrelevant, and failure to furnish particulars in that behalf cannot assist the case of the Department. Observation relating to the failure to disclose the price of ghee supplied is not strictly accurate, for, it was disclosed by the assessees representative that the cheques were delivered for payment of the dues for ghee supplied at Porbandar and that "they were subsequently transferred to Porbandar". It was again no duty of the assessee to disclose to or instruct theOfficer thatthere were "profits embedded in the receipt" of the money at Bombay. Section 34 (l) (a) does not cast any duty upon the assessee to instruct theOfficer on questions of law. The assessee had disclosed that ghee was delivered at Porbandar by him and the price in respect of those supplied was received in Bombay which was subsequently transferred to PorbandarWe are unable to accept the view of the Tribunal that the "question of receipt of sale proceeds m British India was thusThe assessees representative had expressly stated that the assessee had maintained a Bank account in British India in which "for recovering from merchants dues in respect of the goods delivered at Porbandar" were credited. The assessee also produced the Bank Pass Books. The finding that "the question of receipt of sale proceeds wascannot be accepted as correct. The statement that the cheques were "subsequently transferred to Porbandar" only means that the amounts realized by encashment of the cheques were sent to Porbandar, and not thatthe cheques were sent to Porbandar. We do not think that any more detailed disclosure was necessary to comply with the requirements that the assessee had fully and truly disclosed all the material facts necessary for the purpose of assessment.7. TheOfficer may, if he is satisfied, that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, income has escaped assessment, he may assess orthe income. But when the primary facts necessary for assessment are fully and truly disclosed, he is not entitled on change of opinion to commence proceedings forax Officer was apprised of all the primary facts necessary for assessment, and he proceeded to "drop the assessment proceedings". He may have raised a wrong legal inference from the facts, disclosed but on that account he was not competent to commenceproceedings under Section 34 (1) (a) for the two assessment yearsre is no substance in this contention. The assessee had invited the attention of theOfficer to the previous assessment proceedings and also had invited his attention to the fact that on the interest received tax at maximum rate was charged. In the Bank account there was no express reference. But we agree with the High Court that since the factual position having remained unaltered in the assessment yearthere was noof material facts necessary for assessment of the income. TheOfficer was fully aware of the assessment proceedings for the years9, and in his order he expressly referred to those proceedings. Being aware of the earlier proceedings and the reasons for passing the previous order, if theOfficer passed an order in effect holding thatthere was noincome of the assessee chargeable to tax, theOfficer cannot seek to reassess the income on the ground of failure to disclose fully and truly the facts necessary for assessment. We do not think that any ground is made out for disagreeing with the High Court in respect of the validity of the order offor the Year