Amaresh Roy, J. - (1.) This appeal is on behalf of the revenue and has arisen out of an order made by our learned brother, T. K. Basu J., in Matter No. 53 of 1967, by which order his Lordship has granted a writ in the nature of mandamus directing the revenue who were the respondents before his Lordship to "forthwith recall, cancel and withdraw the notice dated the 16th November, 1966, issued by the respondent No. 1 and a writ in the nature of prohibition restraining the respondents to forbear from giving any effect to the said notice. The respondents would, however, be at liberty to proceed according to law". That order allowing the reliefs prayed for in an application under Article 226 of the Constitution arose in the following circumstances : The respondent before us, Calcutta Chromotype (Private) Ltd., is a company incorporated under the Indian Companies Act and carries on business, inter alia, as manufacturers of playing cards, printers and lithographers. The assessment of the total income for the year 1960-61, under Section 23(3) of the Indian Income-tax, 1922, was computed at Rs. 1.62,271. After assessment for the year 1960-61 was completed by the Income-tax Officer, they were served with a notice dated the I5th November, 1966, under Section 148 of the Income-tax Act, 1961, which said that the Income-tax Officer had reason to believe that the company's income chargeable to tax for the assessment year 1960-61 has escaped assessment within the meaning of Section 147 of the Act. The Income-tax Officer by the said notice proposed to reassess the income for the said assessment year and called upon the company to submit the return of its income within the time specified in the said notice. The assessee-company then sent a letter dated the 18th January, 1967, requesting the Income-tax Officer to disclose the reasons upon which he had formed the belief that the company's income has escaped assessment. In that letter the assessee-company contended that the condition precedent for the assumption of jurisdiction under Section 147 has not been satisfied and also that the Income-tax Officer has no materials on which he had reason to believe that the company's income has escaped assessment. Thereafter, the company was informed by the Income-tax Officer who had given the notice by a letter dated the 31st January, 1967, that "the reasons for reopening the assessment for the above year are that the profits on sale of machineries were not disclosed by you". In that respect the company contended that there was no omission or failure to disclose that particular item in the course of the original assessment because in the balance-sheet which was submitted as a part of their return for the relevant year there was not only an entry showing on the liabilities side under the head "Machinery sales suspense" an amount of Rs. 2,17,214.50, but also in that balance-sheet there was a note in these terms : "2. Machinery sales suspense Rs. 2,17,214.50. This amount represents the sale proceeds of certain old machineries. The original cost of the machineries is not available at the moment and, therefore, the profit or loss on the sale cannot be ascertained for the present; the management prefers not to show this amount as a deduction from the value of the relative assets, until the said profit or loss is ascertained."
(2.) Below that note on the auditor's report to the shareholders in that balance-sheet it had been said that the balance-sheet and the trading and profit and loss account dealt with by the report are in agreement with the books of account. The petitioner-company also contended in their application under Article 226 of the Constitution that during the assessment proceedings for the said, assessment year as desired by the Income-tax Officer a representative of the company gave a list of the machineries which were sold during the year before the said Income-tax Officer and the said officer duly considered the accounts and the statements which were produced in the course of the assessment proceedings.
(3.) Against that contention of the assessee-company on behalf of the revenue their learned counsel sought to contend that the relevant item of the profit was included in that balance-sheet and the balance-sheet of the company for the relevant assessment year was before the Income-tax Officer. That is not sufficient disclosure because the learned counsel for the revenue relied on the Explanation to Section 147 of the Act which provides that production before the Income-tax Officer of account books and other evidence from which material evidence could with due diligence has been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of Section 147 of the Act. This contention urged on behalf of the revenue was negatived by the learned trial judge, T. K. Basu J., by holding that Explanation 2 to Section 147 is confined to cases of books of account and other evidence which are produced in the course of assessment proceedings but the balance-sheet of a company is statutorily required to be filed along with the return of the company and so is a part of that return. In other words, the learned trial judge also proceeded to observe that once the statements contained in the balance-sheet are before the assessing authority, there is a duty cast on the assessing authority to enquire into those and find out whether they are relevant for the purpose of computation of the total income and the amount of tax consequent to that view ; the learned judge upheld the contention on behalf of the assessee-company and held that the notice under Section 148 has been without jurisdiction; not only so, the learned judge also accepted the contention of the assessee-company that at the time of the original assessment the accounts and statements were fully discussed and the Income-tax Officer on a full consideration of the facts disclosed with regard to the sale of the machinery did not include any profits arising therefrom in the relevant year. He also pointed out that there was no affidavit filed by the Income-tax Officer who passed the original assessment order, namely, J. Nath, denying these assertions in the petition on behalf of the assessee-company under Article 226 of the Constitution. Upon that view which the learned judge said in his judgment and was fully dealt with by him in his judgment delivered in another case, namely, the case of Shiva Lal v. Income-tax Officer, "L" Ward, he allowed the reliefs prayed for in the petition under Article 226 of the Constitution.;