Case: Gemini Leather Stores Vs. Income Tax Officer, B-Ward, Agra &amp; Others

1. The appellant a partnership firm, was assessed tofor the assessment yearon a turnover of Rupees fifteen lacs by the Incometax officer by his order dated January 22, 1958. TheOfficer did not accept the return filed by the assessee and the books of account produced by it and made a best judgment assessment. The turnover so assessed was reduced by the Appellate Assistant Commissioner and further reduced by the Appellate Tribunal. On March 31, 1965 the Incometax Officer issued a notice under Sec. 148 of theAct, 1961 stating that he had reasons to believe that income chargeable in respect of the assessment yearhad escaped assessment within the meaning of Section 147 of the Act and directing the assessee to file a return as he proposed to reassess the income for the said assessment year. The assessee filed a writ petition before the High Court at Allahabad challenging the validity of the notice dated March 31, 1965 on the ground that theOfficer had no jurisdiction to issue the notice. A learned single Judge of the High Court dismissed the writ petition and his order was affirmed in appeal by a Division Bench. The appeal to this Court is by the assessee on certificate granted by the High Court.

Reasoning: 4. It is not disputed that the case falls under clause (a) of Section 147. Thequestion is whether theOfficer had reason to believe that income chargeable to tax had escaped assessmentfor the assessment yearin question by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts.The law on the point has been settled by this Court in Calcutta Discount Co. Ltd, v.officer, Companies District I. Calcutta. 41 ITR 191   = (AIR 1961 SC 372  ). The decision in Calcutta Discount Companys case is based on Section 34 of theAct, 1922, the provisions of which correspond to those of Sections 147 and 148 of theAct, l961; the points of departure from the old law are not material for the purpose of this case. The position is stated in Calcutta Discount Companys case as follows:"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 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 ............ Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody elsefar less the assesseeto tell the assessing authority what inferences, whether of facts or law, should be drawn."The law laid down in Calcutta Discount Companys case has been restated in several subsequent decisions of this Court: Commr, ofWest Bengal v. Hemchandra Kar, 77 ITR 1   = (AIR 1971 SC 2331   = 1971 Tax LR 1541): Commr. ofGujarat v. Bhanji Lavji, 79 ITR 582   = (AIR 1971 SC 717   = 1971 Tax LR 77); Commr: ofCalcutta v. Burlop Dealers Ltd., 79 ITR 609   = (AIR 1971 SC 1635   = 1971 Tax LR 949) to name only a few.In the case before us the assessee did not disclose the transactions evidenced by the drafts which theOfficer discovered. After this discovery theOfficer had in his possession all the primary facts, and it was for him to make necessary enquiries and draw proper inferences as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year. This theOfficer did not do. It was plainly case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. TheOfficer had all the material facts before him when he made the original assessment. He cannot now take recourse to Section 147 (a) to remedy the error resulting from his own oversight.