NAND KISHORE JHAJHARIA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) By this application under Article 226 of the Constitution the petitioner, Nand Kishore Jhajharia, challenges the validity of certain reassessment proceedings for the assessment years 1946-47 to 1950-51 initiated by five several notices purported to be under Section 148 of the Income-tax Act, 1961. The original assessments for these years had been completed under Section 23 or under Sections 34/23 of the Indian Income-tax Act, 1922, before September, 1955, It also appears that for the assessment year 1949-50 a total income of Rs. 5,93,905 was determined under Section 23(3). Thereafter, the petitioner filed a petition of disclosure and a settlement in writing was arrived at between the petitioner and the Commissioner of Income-tax, West Bengal, on 20th September, 1955, wherein, inter alia, the petitioner agreed to the determination of his total undisclosed income including the undisclosed income of his wife at Rs. 6,87,527. Out of this Rs. 2,00,502 was agreed to be spread over a period of six years, from the assessment year 1939-40 to the year 1944-45 and the balance of Rs. 4,87,025, to be distributed equally over a period of five years from 1945-46 to 1949-50. It was further agreed that the total income including the disclosed income and the total demand including the excess profits tax due for each of the years 1945-46 to 1949-50 would be as follows : <FRM>JUDGEMENT_229_ITR89_1973Html1.htm</FRM>

(2.) There were also other terms regarding penalty, mode of payment of the tax provision for security, etc. In accordance with the aforesaid agreement reassessments for the years 1945-46 to 1949-50 were made under Section 34 of the old Act. On the 27th March, 1956, the assessment for the year 1951-52 was made under Section 23(3) on a total income of Rs. 90,139. This assessment was set aside on appeal by the Appellate Assistant Commissioner on the 29th May, 1959, who directed a fresh assessment. On the 29th March, 1967, the respondent, Income-tax Officer, made a fresh assessment for the year 1951-52 on a total income of Rs. 18,08,294, including therein (i) remittance from Pakistan of Rs. 4,58,155, (ii) deposits in Netherlands Trading Society amounting to Rs. 8,26,250 and (iii) Rs. 5,33,750, received by T. T. from Pondicherry. But the aforesaid assessment was again set aside by the Commissioner of Income-tax under Section 33A(2) on the 10th March, 1969, who directed the Income-tax Officer to make a fresh assessment for that year. By a letter dated the 1st July, 1970, the respondent. Income-tax Officer, asked the petitioner to explain the following deposits in the Netherlands Trading Society : <FRM>JUDGEMENT_229_ITR89_1973Html2.htm</FRM> and also the remittance from Pakistan during the accounting year of Rs. 3,14,403 and receipt of Rs. 5,33,750, by T. T. from Pondicherry on the 22nd March, 1951, and the petitioner was further required to show cause why these amounts should not be assessed in the year 1951-52 as his income. In the meantime, on the 23rd March, 1963, five several notices purported to be under Section 148 of the Income-tax Act, 1961, in respect of the assessment years 1946-47 to 1950-51, were served on the petitioner, requiring him to file his returns for these years as his income had escaped assessment. The petitioner filed five several returns under protest in response to the said notices on the 25th April, 1963. Thereafter, repeated demands by the petitioner to the respondent, Income-tax Officer, for disclosing the reasons for his belief that the petitioner's income for these years had escaped assessment went unheeded and finally a rule was obtained from this court on the 10th May, 1963. The application and the rule were heard on the 3rd July, 1964, and on the counsel for the respondent agreeing to supply the substance of the reasons for the Income-tax Officer's belief that the petitioner's income had escaped assessment within a certain time, the hearing was adjourned., On the 17th July, 1964, the respondent forwarded a statement containing the said substance of the reasons. The petitioner's request to the respondent to clarify certain items of the said statement was rejected. On the 12th July, 1965, the application Under Article 226 of the Constitution was dismissed. An appeal was preferred from the order of dismissal. By an order of the court of appeal dated the 1st July, 1966, the appeal was allowed, a rule was issued in terms of the prayers of the petition and the trial court was directed to hear the rule. As the affidavit-in-opposition originally filed was found to be unsatisfactory, a further affidavit was affirmed by the respondent, Income-tax Officer, pursuant to a direction by this court on the 5th March, 1969, to be used in opposition to the petition. In this affidavit the substance of the reasons supplied to the petitioner was further explained and a copy of the proposal for reopening the assessment of the petitioner for the years 1946-47 to 1950-51 under Section 147(a) was annexed. The reasons given for reopening the assessment were shortly as -follows : (1) The Income-tax Officer came to learn that the petitioner had a fixed deposit account with the National Bank of India Ltd. in which the following deposits had been made : <FRM>JUDGEMENT_229_ITR89_1973Html3.htm</FRM> Though given an opportunity, the petitioner was unable to explain the nature of these deposits. (2) The balance-sheet of the petitioner shows certain consistent credit accounts since the accounting year 1948-49 corresponding to the assessment year 1950-51 as follows : <FRM>JUDGEMENT_229_ITR89_1973Html4.htm</FRM> Though these deposits also appear in the subsequent years, no withdrawals were shown and no interest was credited in this account. Here again, no satisfactory explanation was forthcoming as to the nature of these credits. (3) The petitioner's account with the Netherlands Trading Society shows the following deposits : <FRM>JUDGEMENT_229_ITR89_1973Html5.htm</FRM> It appears that these deposits represent not only credits relevant for the assessment years 1950-51 and 1951-52 but also the accumulated concealed income of earlier years, i.e., from 1946-47. (4) A valuable house property at No. 12, Sunney Park, Ballygunge, was purchased in the name of Smt. Sabitri Devi, the wife of the petitioner, in April, 1951, for Rs. 4,50,000. The

(3.) It is further contended that none of these amounts appear to have been considered in the petitioner's assessment for the relevant assessment years and considering the magnitude of the amounts in the background of the petitioner's assets and/or disclosed income for the various years the presumption is inevitable that these amounts and deposits represent the accumulated profit of the petitioner for at least five previous years.