Case: Union Of India And Others Vs. M/S. Rai Singh Deb Singh Bist &amp; Anr

2. The assessee in these cases in an H.U.F. The assessment years with which we are concerned in these appeals range from 1942-43 to 1953-54. The assessee filed its return for these years in due time. The assessees account-books showed considerable cash credits in the name of the brother-in-law of the 2nd respondent, the Karta of the H.U.F. Those alleged creditors were living in Nepal. The account books also showed certain credit entries in the name of Rana Anand Nar Singh alleged to be in connection with expenses incurred by him for getting trees cut on behalf of the assessee. The assessee was a forest contractor. He had taken large tracts of forests for felling trees in Nepal. The Income-tax Officer went into the genuineness of the cash credit entries standing in the name of the alleged creditors of the assessee as well as to the alleged amount due to one of them. The contention of the assessee was substantially accepted either by the Appellate Assistant Commissioner or by its Revenue Appellate Tribunal with regard to the assessment for the assessment years 1943-44 to 1949-50, the final, assessments were made in pursuance of an agreement or settlement arrived at between the assessee and the Deputy Director of Inspection (Investigation) New Delhi on October 18, 1954, Long after the assessments in question were finalised the Income-tax Officer issued notices to the appellant under Section 34(i)(a) of the Act seeking to reopen the assessment already finalised. The validity of those notices is in issue.

Reasoning: 6. In the instant case, the assessee alleged in his writ petitions that there was no relevant material before the Income-tax Officer before he issued notices under Section 34(1)(a) on the basis of which he could have had reason to believe that any income had escaped assessment. In the writ petitions the assessee called upon the Income-tax Officer to produce the report made by him to the Central Board of Revenue as well as the order of the Central Board of Revenue thereon. Despite this prayer neither the Union of India nor the Income-tax Officer cared to produce the report made by the Income-tax Officer to the Central Board of Revenue under Section 34(1)(a) or the order of the Central Board of Revenue. Before the hearing of the writ petitions commenced, the assessee again applied to the Court to call upon the Union of India and the Income-tax Officer to produce those documents. It response to that application, an affidavit was filed before the Court stating that the relevant records could not be traced from the file of the Central Board of Revenue. Assuming that the concerned records were missing from the file of the Central Board of Revenue the copy of the report made by the Income-tax Officer and the order received by him must have been in the file of the Income-tax Officer No reason was given for not producing those records. These circumstances give rise to an adverse inference against the department. We are constrained to come to the conclusion that the records in question were not produced because they did not assist the departments case. Under these circumstances it is not possible to come to the conclusion that the facts necessary to confer jurisdiction on the Income-tax Officer to proceed under Section 34(1)(a) had been established7. All that was said on behalf of the department was that sometime in the year 1955 the assessee sold large tracts of land to two of his brothers-in-law for a sum of Rs.47 lakhs but in reality that property was not worth that amount we do not know whether there was any basis for this conclusion. As seen earlier the cash credit entries were brought to the notice of the Income-tax Officer before the relevant assessment orders were passed. He had an occasion to investigate into them. It is not necessary to go into this question more deeply in view of the fact that there is nothing to show that there was any relevant material before the Income-tax Officer before he issued the notices under Section 34 91) (a) to have reason to believe that as a result of the assessees failure to state in its return truly and fully any fact, any income had escaped assessment.