S. Rajanna and Another vs First Income Tax Officer

Ramanujam, J.—As the point involved in both the writ petitions is the same, they are dealt with together.

In both the above petitions the petitioners seek a writ of prohibition or any other appropriate writ prohibiting the First Income Tax Officer,

Circle I, Salem, from proceeding with the reassessment proceedings for the assessment year 1961-62 initiated by him in pursuance of the notices

dated April 25, 1968, issued u/s 148 of the Income Tax Act. Each of the petitioners filed his return of income for the assessment year 1961-62,

that is, for the previous year ended April 12, 1961, and the said return of income was accompanied by statement of creditors which included the

borrowal of Rs. 10,000 from Seth Vasumul Lalchand, Madras, and also a claim of Rs. 305 towards the interest payment said to have been made

to the said banker on the said borrowing of Rs. 10,000. The Income Tax Officer completed the assessment in each of these cases for the

assessment year 1961-62 on November 28, 1962, accepting the income returned by the petitioners. Later, for the assessment year 1962-63, that

is, for the previous year ended on April 13, 1962, each of the petitioners again showed a borrowing of another sum of Rs. 10,000 from the same

banker. The Income Tax Officer, however, treated the said sum of Rs. 10,000 as also the borrowal of Rs. 10,000 shown in the earlier year as the

petitioners'' income from undisclosed sources, as the petitioners had admitted that the borrowals were not genuine. Thus, the Income Tax Officer

treated a sum of Rs. 20,000 as the petitioners'' income from undisclosed sources and assessed each of the petitioners on that basis. The petitioners

filed appeals to the Appellate Assistant Commissioner of Income Tax, Salem, who by his order dated June 23, 1967, deleted the sum of Rs.

10,000 from the petitioner''s total income on the ground that the entry relating to the borrowal of Rs. 10,000 was made by the petitioners during

the year ended April 12, 1961, and that, therefore, the borrowai could not be brought to tax in the assessment year 1962.63. Thereafter, the

matter was taken to the Tribunal by the revenue, questioning the view taken by the Appellate Assistant Commissioner. The Income Tax Officer

also issued a notice dated April 25, 1968, to each of the petitioners u/s 148 of the Income Tax Act proposing to reopen the original assessment for

the year 1961-62 after sanction by the'' Commissioner of Income Tax. The notices u/s 148 of the Income Tax Act are impugned in these writ

petitions.

Though various contentions have been raised in the affidavit of the petitioners, the only contention that was urged before us was that the Income

Tax Officer had no jurisdiction to bring to charge the said sum of Rs. 10,000 in the assessment year 1961-62, that is, for the year ended on April

12, 1961. According to the petitioners their borrowal of Rs. 10,000 was shown on April 12, 1961, that is after March 31, 1961, that under the

provisions of the Indian Income Tax Act, 1922, for income from undisclosed sources, the previous year is the financial year ended 31st March,

that since the petitioner''s borrowal was on April 12, 1961, the same, even if it is treated as an income from undisclosed sources, cannot be

considered for the assessment year 1961-62 in view of the decision in Commissioner of Income Tax v. P. Darolia & Sons, [1965] 27 ITR 515.

and, therefore, the Income Tax Officer had no jurisdiction to initiate proceedings against the petitioners for the assessment year 1961-62 u/s 147

of the Act.

In these cases the Tribunal has already held that the sum of Rs. 10,000 can properly be brought to tax as income accrued in the assessment year

1962-63. But the petitioners have sought references to this court against the orders of the Tribunal. Thus the petitioners have taken up the stand

that the addition of Rs. 10,000 each in the assessments for 1962-63 was not correct. It is only because of the stand taken by the petitioners that

the said sum of Rs. 10,000 cannot be brought to charge in the assessment year 1962-63 that the Income Tax Officer has proceeded to reopen the

original assessments by way of protective assessments in respect of the said sum of Rs. 10,000.

In both the cases the original assessments for 1961-62 were completed by the Income Tax Officer on November 28, 1962, tacitly accepting

the statements of the creditors that the hundi loans furnished by the two assessees are correct. Subsequently, in connection with their respective

assessments for 1962-63, the petitioners by their letters dated May 22, 1965, referred to certain hundi transactions for the assessment years

1961-62 to 1964-65 and agreed that the credit of Rs. 10,000 for the year 1961-62 and a further credit of Rs. 10,000 for the assessment year

1962-63 may be added and assessed as their respective taxable income. Presumably, they came forward with this voluntary disclosure to avoid

penalty. On the basis of the aforesaid disclosure made by the petitioners, the Income Tax Officer completed the assessment for 1962-63 in both

the cases adding Rs. 10,000 in each assessment as income from undisclosed sources. The petitioner, however, successfully urged before the

Appellate Assistant Commissioner that the sum of Rs. 10,000 added as income from undisclosed sources cannot be assessed in the assessment

year 1962-63. Therefore, the Income Tax Officer felt that credit of Rs. 20,000 disclosed by the assessees was a non-genuine borrowing for the

year ended April 12, 1961, relevant to the assessment year 1961-62, and proposed to reopen the assessment for the year 1961-62 after getting

the sanction of the Commissioner. As against the appeals filed against the orders of the Appellate Assistant Commissioner the Tribunal had found

that the addition of Rs. 10,000 each in the assessments of the petitioners for 1962-63 were really based on the admissions by the assessees that

the cash credit of Rs. 10,000 each were their taxable income. Though the Tribunal has given its decision that the undisclosed income of Rs. 10,000

each has been rightly brought to tax for the assessment year 1962-63 the petitioners are taking up the stand that the said income of Rs. 10,000

each cannot be brought to charge in the assessment year 1962-63. The Income Tax Officer has to naturally make a protective assessment with a

view to see that the said sums of Rs. 10,000 each do not escape assessment. Therefore, the Income Tax Officer has initiated reassessment

proceedings for the assessment year 1961-62 by issuing notices u/s 148 of the Income Tax Act. What each of the petitioners contends is that the

Income Tax Officer had no jurisdiction to initiate reassessment proceedings for the assessment year 1961-62 in respect of the sum of Rs. 10,000.

The petitioners themselves have admitted before the Income Tax Officer that the borrowals of Rs. 10,000 each entered on April 12, 1961, were

not genuine and that they may be treated as taxable income and brought to tax. Therefore, the only question is as to whether the said undisclosed

incomes are to be assessed in the year 1962-63 or in the earlier years.

The Income Tax Officer originally proceeded to assess the sum during the assessment year 1962-63, for the disclosures were made only in that

year. The petitioners have chosen to challenge that assessment on the ground that the sums of Rs. 10,000 each, even if they are treated as income

from undisclosed sources, cannot be brought to tax during the assessment year 1962-63. The petitioners, though they admitted the sums of Rs.

10,000 each to be their income, have not specifically stated as to when and in what year the income was earned though it is a matter exclusively

within their knowledge. The petitioners'' contention that the Income Tax Officer had no jurisdiction to initiate reassessment proceedings in the

petitioners'' cases for the assessment year 1961-62 u/s 147 of the Act does not appear to be correct. In these cases the assessability of the sum of

Rs. 10,000 in the case of each of the petitioners is not in dispute in view of the fact that the petitioners have themselves admitted during the

proceedings for the assessment year 1962-63 that the borrowing of Rs. 10,000 on April 12, 1961. shown in the return of income was untrue and

that the same may be treated as income from undisclosed sources. Therefore, the only question that is to be considered by the Income Tax Officer

is whether such income can be assessed for the assessment years 1961-62. In our view, the Income Tax Officer has jurisdiction to consider

whether the sums of Rs. 10,000 each could be charged to tax in the assessment year 1961-62 and the notice issued by him u/s 148 of the Income

Tax Act cannot be said to be without jurisdiction as alleged by the petitioners.

On behalf of the petitioners, reference has bean invited to the decision of the Supreme Court in Calcutta Discount Company Limited Vs. Income

Tax Officer, Companies District, I and Another, . in support of their contention that where the action of an executive authority acting without,

jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Court should issue appropriate

orders or direction to prevent such consequences and that the existence of an alternative remedy is not, however, always a sufficient reason for

refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. But, as pointed out by

their Lordships of the Supreme Court in that case, if there were in fact some reasonable grounds for thinking that there had been any non-

disclosure as regards any primary fact, it would have a material bearing on the question of under-assessment and that would be sufficient to give

jurisdiction to the Income Tax Officer to issue a notice u/s 148 and whether those grounds were adequate or not for arriving at a conclusion that

there was a non-disclosure of material facts would not be open for the court''s investigation. The petitioners who want the court to hold that the

Income Tax Officer has no jurisdiction to invoke Section 147 have to establish that the Income Tax Officer had no material at all before him for

believing that there was no non-disclosure of certain material facts. In these cases the petitioners have admitted that there has been non-disclosure

of the income chargeable to tax. The petitioners have also not disclosed as to when and in what year that income had accrued. It cannot, therefore,

be said that the Income Tax Officer had no jurisdiction to proceed u/s 147 read with Section 148 for the purpose, of bringing to tax the two sums

of Rs. 10,000 each admitted to be their income. The question whether the income admitted by the petitioners are to be assessed in a particular

year is exclusively within the province of the Income Tax Officer and it is not open to the petitioners to ask this court to decide as to which year the

income could be related and taxed as such. Once the taxability of the income is not in dispute the assessing officer has jurisdiction to find out in

which year it is to be brought to tax. The petitioners can put forward all their objections as to the assessability of the said income in a particular

year and the Income Tax Officer will have to naturally consider such objections.

The learned counsel for the petitioners refers to the decision of the Supreme Court in Baladin Ram Vs. Commissioner of Income Tax, Uttar

Pradesh, in support of his contention that the sums of Rs. 10,000 each cannot be brought to charge during the year 1961-62. But, as we have

already expressed the view that this is a matter for the Income Tax Officer to decide at the first instance, the petitioner''s submissions as to the year

during which the said amounts can be charged to tax have to be made before the Income Tax Officer.

In the result both the writ petitions are dismissed with costs, one set. Counsel''s fee Rs. 250.