- (1.) THE petitioner in this case is Narsinghdas Bagree. It appears that he has been assessed to income tax for a period of twenty years or more in District 1 (1), calcutta. Since the inception of his file, he was assessed in the status of an "individual" under G. I. R. No. I (1)/n-77/b. From the assessment year 1954-55 his status was changed to that of a "hindu undivided family. " It is stated that from the assessment year 1954-55, the petitioner filed returns in the status of a Hindu undivided family as well as that of an individual. Regular assessments in the status of H. U. F. were made under file No. I (i) 177/b but the returns made in the individual status were merely filed. A file was started, being G. I. R. No. I (1)/n-317/b of the petitioner in his H. U. F. but it was merely noted therein that as the H. U. F. of the petitioner has already been assessed in the other file, no further action was necessary. Returns have been filed up to the assessment year 1961-62. Some complaint has been made in the petition regarding the strange procedure adopted in mixing up the files, but in this application the learned Standing Counsel appearing on behalf of the petitioner has not pressed that point. The only point pressed by learned Counsel is the illegality of certain notices served under section 34 (1) (a) of the Indian Income Tax Act, 1922. In order to appreciate the point, it will be necessary to state certain facts. It appears from the materials placed before me that the assessee had been connected with racing for a large number of years. In fact, during the assessment for past years, a controversy arose as to whether he should be allowed the loss in his racing account. The following extract from the assessment order of the petitioner for the assessment year 1949-50 shows this clearly : - "in the return filed and P/l Account and Balance Sheet furnished, the loss in respect of the Race A/c. has not been claimed and only the balance amount has been shown in the Balance Sheet treating it as usual as an asset. But; subsequently the assessee came with a statement claiming the loss in the account as a business loss. It is definitely an after thought in order to minimise the tax liability and there is no reason why the whole transaction will not be treated as a hobby as has been done so long and admitted by the assessee himself in the statement furnished. As such even if it is admitted but not accepted to be a loss, it is clearly in the nature of personal expenses and at best a casual loss and far away to have any connection with trading profit. Moreover there were no receipts of payments for the expenses alleged to have been incurred by the assessee. In view of the reasons stated above, the loss claimed by the assessee on this account is not entertained. As such the question of summoning different parties under sec 37 for verification of the expenses incurred, as claimed by the assessee does not arise. "
(2.) ON 27th February, 1961 Mr. A. K. Banerjee, the Income-tax Officer, "b"' Ward, Dist, II, Calcutta, wrote a letter to the petitioner, a copy whereof is annexure "f" to the petition. This letter was entitled "show Cause for starting 34 proceedings Assessment years. " It is stated in the letter that it appeared from the petitioner's bank account with the Eastern Bank Ltd. , that he had deposited a sum of Rs. 4,98,045/- between the dates 4. 1. 43 and 29. 8. 44 being relevant for the assessment years 1942-43, 1943-44 and 1944-45. Thereafter appears this rather amazing statement: - "you have stated in your letter dated 6. 11. 57 that the balance sheet of the assessee of the relevant assessment year was there in the Income-tax file but no such balance sheet could be found in the file. Therefore, it appears that you had not disclosed bank account and the deposit therein at the time of assessments for the three years. You, are therefore, requested to explain why proceedings u/s 34 may not be drawn against you in view of unexplained concealed income noted herein before. "
(3.) IN answer to it, by his Advocate's letter dated 27th February, 1961 the petitioner stated that these deposits were disclosed in the petitioner's individual assessment and in the assessment of Messrs. Bhicomchand Bagree and this represented the proceeds of stakes or bets in racing. It was further stated that this racing was done by the members of the Hindu joint family of Bhicomchand Bagree although the account was in the petitioner's name, and this was disclosed and the profits and loss of the "racing hobby" had been decided long ago. An extract from the 1949-50 assessment order noted above, was set out. On or about 22nd March, 1962 notices were issued under section 34 (1) (A) for the assessment years 1943-44, 1944-45 and 1945-46. It is now stated that there was a typing mistake and that they were notices under section 34 (1) (a ). The reasons for issuing notices under section 34 were not, of course, communicated to the petitioner but they have now been set out in an affidavit filed by Pyaray Lai Kanojia, Income-Tax Officer, "b" Ward, District II, Calcutta, affirmed on 6th July, 1962. The reasons have been stated as follows:- "on receipt of certain informations it was found that the assessee and/or the petitioners had deposited in the Eastern Bank Rs. 4,98,045/- during the period 4th January, 1943 to 29th August, 1944. It was also found from the petitioner's file for the assessment years 1944-45 to 1945-46 that the petitioner did not disclose this bank account for the assessment years. In view of the same proceedings were taken for reopening the assessment under section 34 (1) (a) after getting permission of the Central Board of Revenue to enquire the source of deposits. In view of the materials that have come into my possession I have reasons to believe and I bonafide believe that due to omission and failure on the part of the petitioner the income has escaped assessment. It further appears from the records for the assessment years 1944-45 and 1945-46 that there is nothing in record to indicate that this account was ever disclosed or that the deposit explained. ";