Arun K.Mukherjea J. - (1.)In the present application which has been referred to us under Chapter V, rule 2, of the Original side Rules of this High Court the petitioner has challenged the validity of a notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening an assessment of the income of the petitioner for the assessment year 1958-59.
(2.)The petitioner was assessed for the assessment year 1958-59, under Section 23(3) of the Indian Income-tax Act, 1922, on 14th June, 1960, when his total income was computed by the respondent No. 1 at Rs. 37,872. In the year of assessment the Income-tax Officer allowed the deduction of a sum of Rs. 15,991 by way of expenses claimed by the assessee. The expenses that were allowed appear from page 13 of the paper book and include one item of Rs. 10,494-4-3 by way of interest. A complete list of the creditors to whom interest had been paid on account of loans taken from them appears from pages 15 to 16 of the paper book. The petitioner states that at the time of the original asssessment proceedings he had produced through his authorised representative all books of account, bank statements and other necessary documents in connection with his returns and the assessment was made by respondent No. 1 after he had been satisfied "on a due consideration of all the necessary materials produced by" the petitioner. Almost six years after the completion of the said assessment the petitioner was served with a notice dated 8th March, 1967, issued by respondent No. 2, Income-tax Officer, "E" Ward, Hundi Circle, under Section 148 of the Income-tax Act, 1961. The petitioner has, by that notice, been called upon to submit within 30 days from the date of service of the notice a return in the prescribed form of the petitioner's income for the assessment year 1958-59. The notice states that the Income-tax Officer concerned had reason to believe that the petitioner's income which was chargeable to tax for the assessment year 1958-59, has escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961, and that the notice was being issued "after obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal (I), Calcutta". On 2nd May, 1967, the petitioner through his lawyer told the respondent No. 2 that according to him there is no material on which "the said Income-tax Officer had reason to believe that the petitioner's income had escaped assessment and, therefore, "the condition precedent for the assumption of jurisdiction" by the Income-tax Officer concerned had not been satisfied. The petitioner asserted that the Income-tax Officer was merely starting a fishing investigation and had no competence, jurisdiction and/or authority to reopen the assessment under Section 147 of the Income-tax Act, 1961, "on a mere change of opinion". The petitioner further asked the officer concerned to furnish all the materials on which he had reason to believe that income had escaped assessment. Apparently, the petitioner did not receive any satisfaction from the Income-tax Officer and made an application before this court and obtained a rule nisi on 30th May, 1967.
(3.)An affidavit-in-opposition was, in due course, filed on behalf of the respondents in answer to the aforesaid rule. Only two paragraphs, namely, paragraphs 5 and 6 of the affidavit, are important for the purposes of this application. In paragraph 5 it was denied that all materials relevant and necessary for the assessment of the petitioner's income for the assessment year 1958-59, had been produced before the Income-tax Officer at the time of the original assessment. In paragraph 6 the principal case of the respondents for reopening of the assessment was made out in the following language:
"Subsequent to the assessment for the assessment year 1958-59, it was discovered, inter alia, that some of the loans shown to have been taken and interests alleged to have been paid thereon by the petitioner during the relevant assessment year were not genuine. The Income-tax Officer had reason to believe and bona fide believed that the said alleged loans and the interest alleged to have bean paid thereon are not genuine. If necessary, I crave leave to produce before the hon'ble judge hearing the application, the relevant records on the basis of which the said Income-tax Officer had reason to believe that the income of the petitioner escaped assessment as aforesaid at the hearing of this application."