PARIMISETTI SEETHARAMAMMA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE references have come before us on a direction by us to refer a question of law arising in the case under section 66 (2) of the Indian Income-tax Act. The assessee is one Sitaramamma alias Manavathi Bai, resident of Nuzwid, West Godavari. She was assessed by the Income-tax Officer, Vijayawada, for the assessment year 1946-47. She was asked to submit a return and in the return that she submitted she showed a sum of Rs. 70,000 as gift received in cash from Princess Sita Devi, daughter of the Raja of Pithapuram, who was married to the Kumar Raja of Vuyyur and after divorce married to the ex-Gaekwad of Baroda. As the assessee did not file any documents or adduce any evidence in support of the version of the gift, the Income-tax Officer treated the receipts as salary and remuneration and as he found that the assessee had received valuable jewellery also from the said Sita Devi, he added the value of the jewellery also, viz., Rs. 4 lakhs, in computing the taxable income. The total taxable income according to him was Rs. 4,70,000 (Rs. 4 representing the value of the jewellery and Rs. 70,000 cash received from Sita Devi). The assessee went in appeal before the Appellate Assistant Commissioner and contended that the amounts were not salaries paid, and submitted that the various amounts received by her could be regarded only as "windfall". The Appellate Assistant Commissioner not because the record before him showed that she had acted as the local agent of the said Sita Devi and it has also appeared that she was styled the private secretary of the said Sita Devi, he came to the conclusion that the amounts received by her were in lieu of services rendered to the said Sita Devi. In the result he affirmed the order of the Income-tax Officer with regard to the sum of Rs. 70,000 treating it as amount received by the assessee for services rendered. With regard to the value of the jewellery the jewels were got valued by a local firm of jewellers, Ummidi Ramiah Setti, and taking the valuation of the said firm the Appellate Assistant Commissioner estimated the value of the jewellery at Rs. 20,000 and thus varied the order of the Income-tax Officer by reducing the assessable income of Rs. 90,000. The assessee, aggrieved by the order of the Appellate Assistant Commissioner, took the matter before the Income-tax Appellate Tribunal and the Tribunal confirmed the order of the Appellate Assistant Commissioner. The Tribunal was of the opinion that the assessee having and had ample opportunity to lead evidence with regard to the nature of the receipt that it was a gift or a voluntary payment made by Sita Devi out of love and affection for her, not having substantiated her contention, treated the property as taxable income.

(2.) IT may be mentioned that assessment in regard to the years 1946-47, 1947-48, 1948-49 and 1950-51 were completed by having recourse to proceedings under section 34 of the Indian Income-tax Act. In so far as the assessment for the years 1946-47 was concerned, the assessee did not dispute the validity of the initiation of the proceedings under section 34. The objection was taken only to the re-opening of the proceedings under section 34 with regard to the other three years.

(3.) WITH regard to R. C. No. 12 of 1960 it would appear that the Income-tax Officer started taking proceedings under section 34 of the Act with regard to the assessments for the years 1947-48, 1948-49, and 1950-51. The Income-tax Officer initiated proceedings under section 34 stating that he had come to know that the assessee was in the employ of Sita Devi as a result of which she had received Large amount in question and as he was of the opinion that the assessee did not disclosed fully and truly all material facts he purported to act under section 34 (1) (a) of the Act. A sworn statement of the assessee was recorded by the Income-tax Officer on December 26, 1954, and according to the Income-tax Officer, her statement threw a flood of light on the nature of the receipt of the amounts which were not brought under assessment. On these grounds he though that action under section 34 (1) (a) was justified. WITH regard to the assessment for the year 1948-49 an objection was taken by the assessee that the reassessment could not be regarded as having been validly made since 30 days clear notice had not been given. So far as this objection is concerned, the Tribunal has upheld the objection and set aside the reassessment for the year 1948-49. In so far as the reassessment for the subsequent year is concerned, the Tribunal was of the opinion that the initiation of the proceedings under section 34 had been validly made. The argument of the learned counsel before us is that there was absolutely no justification for action being taken under section 34 in the present case. It was urged that there was no failure to disclose any material facts on the part of the assessee in making the return of her income, because she had made a complete disclosure by submitting the account books and given her statement. It was also urged that there was no material on record on the basis of which it would be said that the Income-tax Officer had reason to believe that there was an assessable income which had escaped assessment. The conditions necessary for the exercise of jurisdiction by the Income-tax Officer for taking action under section 34 (1) (a) of the Act are clear. The section reads as under :