HARBANS SINGH, J. - (1.) FACTS giving rise to this writ may briefly be stated as unde : The petitioner, Ram Kishan Dalmia, was assessed for the year 1950-51 by the Income-tax Officer and, therefore, during the course of assessment for the subsequent years, certain information came to the notice of the Income-tax Officer, as a result of which, after getting the sanction of the Income-tax Commissioner, he issued notices under section 34 of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act), in March, 1959, stating that the income of the assessee-petitioner assessable to income-tax for the year ending 31st March, 1951, has escaped assessment or has been under-assessed and that it was proposed to assess/reassess the income that has escaped assessment or has been under-assessed, and he called upon the petitioner to deliver within 35 days of the receipt of this notice, a return in the form which was attached with the notice. It was against these notices that the present petition has been filed.
(2.) THE main contention on behalf of the petitioner was that, in fact, the conditions precedent required for the issue of the notice under section 34 of the Act have not been satisfied and that no definite information came to the notice of the Income-tax Officer after the date of the assessment and as such the notices were without jurisdiction. In paragraph 4 of the petition it was further urged that when the petitioners representative appeared before the Income-tax Officer, he was told that proceedings were initiated with a view to adding certa in sums of money and deleting certain other sums, credit for which had been allowed and it was urged that the Income-tax Officer, reassessing under section 34, could not either add certain sums or delete certain others, for which credit had been given to the petitioner. I feel that this question of details cannot be gone into in the present petition. If the Income-tax Officer has jurisdiction to issue notice under section 34 and take the proceedings threatened to be taken, these and other matters can be urged before him, and in case he gives a decision, which, according to the petitioner, is not correct, there are remedies provided in the Income-tax Act itself for getting redress from the higher authorities. I would, therefore, only deal with the main point urged as to whether, in the circumstances of the case, the action of the Income-tax Officer in issuing the notice is warranted under the law. There are two eventualities in which the Income-tax Officer can reopen the case and make a reassessmen : firstly, where there has been failure to disclose all material facts by the assessee and, secondly, where under-assessment, etc., is due to omission or failure on behalf of the assessee to make a return of his income. In both the cases, the Income-tax Officer can take action and the only difference is that in the first case he can take action within eight years while in the second case he can take action within four years of the end of the year of assessment. In the present case notice has been issued admittedly more than four years after the end of the year of assessment and it was conceded that the case must fall under the first category, which is covered by sub-clause (a) of such-section (1) of section 34, the material part of which is as follow : "34. (1) 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 disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or,... He may in cases falling under clause (a) at any time within 8 years.. 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 22 and may proceed to assess or reassess such income, profits or gains or recompute tHe loss or depreciation allowance...." According to this, two conditions precedent must be satisfied before an Income-tax Officer can have jurisdiction under section 34 to issue notice in respect of assessments beyond the period of four years. These are, firstly, that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax had been under-assessed, and, secondly, he must have also reason to believe that such under-assessment had occurred by reason of either (a) omission or failure on the part of an assessee to make a return of his income, or (b) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. It is further laid down by the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Calcutta (the majority judgment being delivered by S.K. Das J.), that all that the assessee is bound to disclose are the primary facts in his possession and it is for the Income-tax Officer to draw inferences from these primary facts. The duty of the assessee does not extend beyond the full and truthful disclosure of all primary facts."Once all the primary facts were before the assessing authority, it was for him to decide that what inferences of facts could be reasonably drawn and what legal inferences had ultimately to be drawn. It was not for anybody else - far less the assessee - to tell the assessing authority what inferences, whether of facts or law, should be drawn." The main question for determination in the present case is whether there has been such omission on behalf of the assessee so as to give jurisdiction to the Income-tax Officer to issue notice under section 34.
(3.) THE order for the assessment year 1950-51 which is desired to be reassessed was passed on March 31, 1955, by the Income-tax Officer, Special Investigation Circle. This order is annexure "E". A number of shares owned by Messrs. Bharat Bank Limited were contracted to be purchased by the assessee under an agreement dated 5th of February, 1948. THEse shares were in respect of Dalmia Investment Company Limited, Dalmia Cement and Paper Marketing Company Limited and Lahore Electric Supply Company Limited. THE consideration agreed to be paid for them was over Rs. 44,00,000. If the delivery of the shares was not taken by March 31, 1948, it was provided that the consideration would bear 6 per cent. interest from April 1, 1948, till the date of actual delivery. It was further provided that if the delivery was taken, latest by March 31, 1951, the Bharat Bank would be entitled to sell the undelivered shares at the prices then prevailing and hold the assessee liable for the difference. THEse shares were actually taken delivery of on dates between February, 1952, and September, 1952. Thus, for the purpose of the assessment for the year 1950-51 these shares were held by the assessee. A considerable amount became due on the amount as interest on the unpaid price and this was taken into account by the Income-tax Officer taking the transaction of the sale of the shares to be a business transaction. Later on, while making assessment for the year 1953-54, this is what is stated by the Income-tax Office : "Looking into the list of shares contracted for, it appeared rather peculiar as to how shares of Lahore Electric Supply Company Limited of the value of about Rs. 35 lakhs appeared to be a sound investment in February, 1948, after the partition of the country; much less it could be appreciated as to how shares of the face value of Rs. 10 and Rs. 100 were purchased at a rate many times more than the face value. Similarly, the investment in the shares of Messrs. Dalmia Cement and Paper Marketing Company Limited could not prove to be an attractive investment.. and the preference shares of Dalmia Investment company Limited could also not be the right investment for a share dealer int he ordinary course of his business... The assessee has thrown no light, whatsoever, on the driving motive for entering into this deal and about its being a sound commercial proposition. No evidence has been adduced, e.g., market quotations or balance-sheet, in support of the price at which these shares were contracted to be purchased in 1948. Prima facie, the rates quoted are very high and call for such a substantiation, but the assessee not having furnished any such information, we are left to fall back on our own information about the considerations which would have brought about this transaction and as to whether it was a normal commercial transaction entered into in the course of the assessees business." Then follow the facts which were revealed as a result of the enquir : "The enquiries reveal that on February 5, 1948, two other deals were also entered into by Messrs. Bharat Bank Limited with Mr. J. Dalmia for shares worth Rs. 9,41,775 in respect of Bharat Fire and General Insurance ordinary and preference shares and Lesco Chemical Works Limited ordinary shares and with Shrimati Rama Jain, wife of Shri Shanti Parshad Jain, of Rs. 8,40,500 in respect of the Dehri-Rohtas Light Railways and National Safe Deposit and Cold Storage shares. The three deals taken together amounted to a very substantial figure of Rs. 61,97,265. This clearly shows that Messrs. Bharat Bank Limited had invested very heavily out of its funds with these Dalmia concerns which were almost the close preserves of Dalmias and were controlled almost entirely through the instrumentality of benamis, e.g., Messrs. D.C.P.M. Co. Ltd. and Dalmia Investment Co. Ltd. ;