B.C.BASAK J. - (1.) THIS appeal is directed against a judgment and order passed by the learned trial judge in a writ petition. The writ petition was filed by the appellant herein praying for a writ in the nature of mandamus commanding the respondents and each of them to rescind and to withdraw and/or cancel and/or forbear from giving effect to the impugned notice being annexure 'D' to the petition issued under section 148 of the Income -tax Act, 1961 (hereinafter referred to as 'the said Act'). The said notice provides as follows : 'Whereas I have reason to believe that income chargeable to tax for the assessment year 1961 -62 had escaped assessment within the meaning of section 147 of the Income -tax Act, 1961. 1, therefore, propose to reassess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income far the said assessment year. 2. This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income -tax, West Bengal -III, Calcutta. Sd/ - Illegible, Income -tax Officer, 'G' Ward, Companies Dt.IV, Calcutta.'
(2.) ONE of the contentions raised on behalf of the writ petitioner was that the condition precedent to the exercise of power under section 148 of the Act is non -existent and there was no material on the basis of which such 'reason to believe' could be formed. We set out hereinbelow the relevant portions of sections 147 and 148 of the Act. 'Section 147. Income escaping assessment. - 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 (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1. - For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : - (a) where income chargeable to tax has been underassessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income -tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed.
(3.) EXPLANATION 2. - Production before the Income -tax Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Income -tax Officer will not necessarily amount to disclosure within the meaning of this section. Section 148. Issue of notice where income has escaped assessment. - (1) Before making the assessment, reassessment or recomputation under section 147, the Income -tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub -. section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub -section. (2) The Income -tax Officer shall, before issuing any notice under this section, record his reasons for doing so.' In the affidavit -in -opposition, it was stated as follows : '4. Before dealing with the said petition further, I set down hereunder certain facts which would be material and relevant for an effective determination of the matter in issue : (a) In the course of the assessment for the assessment year 1963 -64, it was found that the assessee -company credited in its books of account for the previous year ended on October 30, 1960, relevant to the assessment year 1961 -62, hundi loans in the names of Jethanand Madhabdas, Seth Giridharidas Rughoomal and Amarlal Mulchand and two others, in all amounting to Rs. 3,10,000. (b) Sri Mulchand Roars, proprietor of Amarlal Mulchand, made a confessional statement before the Income -tax Officer, 'E' Ward, N.C.E.P. T.I., on February 4, 1966, that from 1952 till 1965 he was doing name -lending for bogus hundi loan transactions and no genuine hundi loans were advanced to any party in the name of Amarlal Mulchand during the said period. (c) Sri Raghumal Makhia, partner of Giridharilal Raghumal, also made a confessional statement before the said Income -tax Officer on December 18, 1965, that since the starting of the partnership firm under the style of Giridharilal Raghumal on January 1, 1956, till the date of its closure of the business, the firm was completely involved in name -lending for bogus hundi transactions and that they never advanced any genuine hundi loans to any party. (d) The aforesaid confessional statements to which reference would be made at the time of the hearing of this case for terms, scope, effect and import thereof and which the answering respondents would also like to treat as a part of this affidavit were received from the Inspecting Assistant Commissioner of Income -tax, Survey Range, Calcutta. (e) Messrs. Jethanand Madhabdas could not be traced at the given address and it was found on an enquiry that he was never a tenant of the premises in question. I say that his assessment records show that he never maintained any books of account and he was also engaged in bogus namelending business. The said records of the said assessee would be produced at the time of the hearing of this case for terms, scope, effect and import thereof and the answering respondents would also treat them as a part of this affidavit. The other two parties, viz., Kishandas Giridharidas and Narain Singh Amarlal, were also not genuine hundi loan givers.;