Gulati, J. - (1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act").
(2.) THE assessee is a limited company. THE assessment year involved is 1957-58 with the previous year ending on 31st December, 1956. THE asses-see filed the return on 31st December, 1957, and the assessment was made on 27th March, 1958. For the assessment years 1951-52 and 1952-53, the assessments were made on 20th March, 1956, and 29th March, 1956, respectively. Interest on advance tax under Section 18A(5) of the Indian Income-tax Act, 1922, amounting to Rs. 9,696 and Rs. 5,083 for the two years respectively was allowed to the assessee by adjustment against the existing demand for the assessment year 1957-58. This means that in the previous year relevant to the assessment year 1957-58, the assessee had received interest from the income-tax department on advance tax relating to the assessment years 1951-52 and 1952-53. This interest the assessee did not show in its return for the year 1957-58. After the assessment was made the Income-tax Officer discovered this omission and he accordingly on 19th September, 1964, commenced proceedings against the assessee under Section 148 read with Section 147(a) of the Act and made a reassessment by including in its income the two amounts of interest received by the assessee on advance tax. THE assessee challenged the inclusion on two grounds : (1) that the case was not covered by Section 147(a) of the Act, and (2) that the interest related to the assessment years 1951-52 and 1952-53, and the same could not be assessed in the assessment year 1957-58. Both these contentions of the assessee were negatived by the Income-tax Officer, the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal. THE assessee is aggrieved and at his instance the Tribunal has submitted the following two questions of law for the opinion of this court: "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Officer rightly assumed jurisdiction under Section 147(a) of the Income-tax Act, 1961, for the assessment year 1957-58? (2) Whether, on the facts and in the circumstances of the case, the payments of the amount of Rs. 9,696 for 1951-52 on March 20, 1956, and of Rs. 5,083 for 1952-53 on March 29, 1956 representing interest under Section 18A(5) of the Indian Income-tax Act, 1922, could be treated as income of the assessment year 1957-58 only?" Section 147 deals with income escaping assessment. Clause (a) is applicable where income escapes assessment due to the failure of the assessee to file a return under Section 139 or to disclose fully and truly all material facts and Clause (b) applies where escapement takes place notwithstanding that there has been no omission or failure on the part of the assessee as mentioned in Clause (a). Where Clause (a) is applicable proceedings for reassessment can be initiated within a period of 8 years or 16 years depending upon the amount of the escaped income and where Clause (b) applies the period of limitation is 4 years from the end of the assessment year concerned. It is not disputed by the assessee that income from interest has escaped assessment but according to it Clause (a) of Section 147 is not applicable because there has been no omission or failure on the part- of the assessee either to file the return or to disclose fully and truly all material facts. No doubt, the assessee filed its return for the year 1957-58, but he did not include in its total income the interest received from the department on advance tax. A question arises whether such an omission amounts to non-disclosure of material facts within the meaning of Clause (a) of Section 147.
(3.) UNDER Section 139 of the Act an assessee is required to file a return of its total income and to furnish other prescribed particulars. The return is to be verified in the prescribed manner. It is the primary duty of the assessee to disclose in the return all his income. If he omits to disclose a part of the income, he cannot be said to have disclosed fully and truly all material facts and he is caught within the mischief of Clause (a) of Section 147, The defence of the assessee in the instant case is that even though it did not show interest income in its return, the Income-tax Officer was aware of the fact that the assessee had earned interest on advance tax because he himself had calculated the interest and adjusted the same against the demand for the assessment year 1957-58 at the time of final assessment for the year in question. In the alternative, it is pleaded that the Income-tax Officer could with due diligence have discovered this fact. Now, there is no material on record to show that the Income-tax Officer was aware of the fact that the assessee had earned income from interest and he deliberately omitted to include the same in the assessment for the year 1957-58. It is possible, however, to contend that the Income-tax Officer could have discovered this fact from the assessment records of the assessee. In our opinion, this possibility does not change the legal position. The primary duty to disclose all income lies upon the assessee and the fact that the Income-tax Officer with due diligence could have discovered the assessee's true income does not absolve the assessee from discharging his primary duty. In some cases an assessee may dispute that a particular receipt is his income. Even in such a case the assessee is required to disclose all material facts to the Income-tax Officer so that he may adjudicate upon the issue, and if the Income-tax Officer omits to bring it to tax under some erroneous belief or through an inadvertent error, Clause (a) of Section 147 may not be applicable. But the instant case is not one of those cases. Here there is no dispute about the two items of interest being the assessee's income. The assessee had also not put forward a claim that interest income was not taxable. It was the assessee's duty to include this income in its total income in the return filed by it and because of his omission to do so, the income escaped assessment. The escapement, in our view, was due directly to the default on the part of the assessee. The case is thus squarely covered by Clause (a) of Section 147.;