KRISHNASWAMI IYER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference under S.66 (2) of the Indian Income Tax Act made by the Madras Bench of the Income Tax Appellate Tribunal in compliance with the direction in the order of the High Court of Travancore Cochin in O. P. Nos. 146, 147 and 148 of 1954. All the three original petitions were filed by the same assessee, and they related to his assessments under the Travancore Income Tax Act for the years 1122, 1123 and 1124 M. E. He was first assessed for these three years by the Income Tax Officer, Salary and Non resident Refund Circle, Alleppey. Later, acting under S.47 of the Travancore Income Tax Act, the Income Tax Officer issued a notice to him for reopening the three assessments, and after hearing his objections re-assesssed him for considerably larger amounts in respect of all the three years by a consolidated order dated 10-12-1949. These re-assessments were taken by him in appeal to the Appellate Assistant Commissioner of Income Tax, Ernakulam, and the Appellate Assistant Commissioner quashed all the three assessments on the ground that there was no definite information before the Income Tax Officer leading to the discovery that income during the three years in question had escaped assessment and therefore the proceedings for re-assessments were wrongly initiated by him. The Appellate Assistant Commissioner did not go into the question whether the additional amounts for which the re-assessments were made by the Income Tax Officer were really the income of the assessee or not. On appeal by the department the Income Tax Appellate Tribunal set aside the Appellate Assistant Commissioner's order and remanded the appeals from the three assessments to the Appellate Assistant Commissioner for a rehearing and fresh disposal holding that there was definite information before the Income Tax Officer enabling him to reopen the assessments. Thereupon, the assessee asked for references to be made to the High Court under S.66 (1), and, on the refusal of the Appellate Tribunal to make such references, he filed the original petitions mentioned above in the High Court of Travancore Cochin and obtained the order directing the Tribunal to make the references.

(2.) A consolidated case has been stated by the Appellate Tribunal referring to this court one common question in respect of all the three assessments, and the question is:

(3.) The notices for reopening the assessments under S.47 were sent to the assessee with a covering letter from the Income Tax Officer. In that covering letter the Income Tax Officer had informed the assessee that on enquiries he understood that he (the assessee) had made huge investments during the three years as deposits in banks and by purchases of shares in companies, and he called upon the assessee to make a correct return of his income disclosing all the deposits in banks and shares in companies. It was admitted by the assessee before the Income Tax Officer that he had made large investments as deposits in banks and by purchases of shares in companies, to the extent of about Rs. 80,000/-, and he put forward a case that they were made partly with the savings from his salary in the past years and partly with amounts entrusted with him and with the sale proceeds of ornaments entrusted with him by his mother for the benefit of his daughters to whom she had given them as Sthreedhanam. These amounts or the income therefrom had not been disclosed in the returns for the years 1122, 1123 and 1124. Before issuing the notices under S.47 there was some correspondence between the Income Tax Officer and the Inspecting Assistant Commissioner about this case, and during the course of that correspondence the Income Tax Officer had written to the Inspecting Assistant Commissioner: "........... I write to inform you that as a result of the enquiries made by me it is