Sabyasachi Mukharji, J. - (1.) In this application under article 226 of the Constitution the petitioner, which is a company registered under the Companies Act, 1956, challenges the notice dated the 29th of March, 1968, issued under Section 148 of the Income-tax Act, 1961, re-opening the assessment for the assessment year 1959-60 under the Income-tax Act, 1961. The petitioner contends that there is no material for the issuance of the said notice. Inasmuch as the said notice was issued beyond the period of four years from the end of the relevant assessment year the said notice must have been issued under Clause (a) to Section 147 of the Income-tax Act, 1961. The provisions of the said section are well known and the material part of the said section provides as follows : "If- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income-tax Officer, or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in sections 148 to 153 referred to as the relevant assessment year)."
(2.) In the assessment order for the relevant assessment year the assessing officer, inter alia, observed as follows : "In response to notice under Section 23(2) Sri S. C. Sarkar, authorised representative and the accountant for the assessee, appears and states that the assessee-company lost its books of accounts in the hands of his ex-employee who has stolen them and destroyed them while action was being taken against him. Necessary evidence have been furnished in this respect relating to suits filed against that employee. However, the assessee filed audited balance-sheet and profit and loss account. The assessee's books of accounts lost (sic)."
(3.) In the affidavit-in-opposition filed by the respondent. Income-tax Officer, in answer to the rule nisi issued herein, it was stated as follows : "I say that during the course of the original assessment proceedings Sri S. C. Sarkar, the authorised representative and accountant of the assessee, appeared and submitted that the assessee had lost its books of accounts and connected bills, vouchers, etc., in the hands of its ex-employee who had stolen and destroyed them. Thus, I say the assessment in the instant case was completed under Section 23(3) of the Indian Income-tax Act, 1922, without reference to the books of accounts and documents. I say that subsequently a search was duly conducted on February 10, 1966, and as per the seizure list the following books of accounts and documents relating to the assessment year 1959-60 were discovered in the assessee's premises: JUDGEMENT_992_ITR106_1977Html1.htm I say that at the relevant time when the reassessment proceedings were initiated under Section 147(a) of the Income-tax Act, 1961 (hereinafter referred to as the "said Act"), the seized documents could not be opened. I say that although the seized documents could not be opened owing to the prohibitory order from this hon'ble court it was evident from the inventory of the seized books that the books of accounts and documents of the petitioner for the accounting year 1958-59, which is relevant for the assessment year 1959-60, were in the possession of the assessee and by not producing them during the course of assessment proceedings and by making a wrong statement that the books of accounts were stolen and destroyed, the assessee's income had escaped assessment or had been under-assessed. I say further that the balance-sheet and profit and loss account for the said accounting period ending March 31, 1959, as submitted by the auditor and chartered accountant was based on a trial balance which was prepared by the company and the auditor could not verify the said trial balance with the relevant books of accounts, vouchers and documents, the latter being not available at any point of time to the auditor. I say that this fact would be clear from the auditor's report which runs thus : I am reported that the books of accounts could not be recovered. The managing director, however, claimed that a trial balance for the aforesaid period (for the year ending March 31, 1959) for head office and branches had been prepared before the theft from the books of accounts of the company ...... In the absence of details and the supporting vouchers, documents, lists and schedules, I could not verify any of the figures as shown therein and have taken the figures as they are. Thus I say that the audited balance-sheet and profit and loss account in the instant case were not conclusive proof in determining the petitioner's true income. In the circumstances I had reasons to believe that if the books of accounts had been produced they would have gone against the assessee-petitioner, i.e., they would have shown much bigger income than what the assessee-petitioner had shown in the return of income. I, therefore, had reasons to believe and I actually believed and I was satisfied that due to omission and/or failure on the part of the assessee-petitioner to disclose fully and truly all material facts necessary for the assessee-petitioner's assessment for the said year, income chargeable to tax had escaped assessment for that year. ";