RUSTOMJI Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS order will also govern the disposal of Miscellaneous Petitions Nos. 390,391,392,393, and 394, all of 1962.

(2.) THE relevant facts are these. The petitioner is a resident of Mhow, which was formerly a part of the quondam Holkar State. In or about 1934, he began interesting himself in business activities in the then British India and acquired a textile mill, known as the New Premier Mills, Bombay. He also purchased in 1939 a cotton ginning and pressing factory at Khamgaon. For the asst. yrs. 1940 -41, 1941 -42, 1943 -44 and 1946 -47, the petitioner was assessed to income -tax at Khamgaon in the former Central Provinces and Beraer as a non -resident. For the asst. yrs. 1942 - 43, 1944 -45, 1945 -46, he was assessed to tax as a non -resident by the ITO, Special Income -tax cum Excess profits Tax Circle, Nagpur, in the old C.P. and Beraer. For the asst. yrs. 1944 -45 and 1945 -46 he was also assessed at Mhow as a resident and ordinarily resident in respect of income from properties situated in Mhow. The order of assessment for the assessment years in question were made in 1942, 1944, 1945, 1946, and 1947, on various dates on 23rd March, 1962. The ITO concerned served on the petitioner six notices under S. 34 of the Act in respect of escaped income for the aforesaid years. The notice for the asst. year 1940 -41 was in the following terms : "Whereas I have reason to believe that your income assessable to income -tax for the asst. yr. 1940 -41 has (a) escaped assessment, (b) been under -assessed, I therefore, purpose to reassess the said allowable that has income (a) escaped assessment, (b) been -under assessed, I hereby require you to deliver to me within 35 days of the receipt of this notice, a return in the attached form of your total income and total world income assessable for the said asst. year 1940 -41.

(3.) IN the returns filed on behalf of the ITO concerned in each case it has been averred that the notices were plainly under s.34(1)(a) as they were issued after obtaining the necessary satisfaction of the Central Board of Revenue, that for a notice under S. 34(1)(b), the previous satisfaction of the CIT or the Central Board of Revenue was not required, that the petitioner himself understood each of the notices issued to him as one under S. 34(1)(a), that the notices no doubt related to the escaped income of the period mentioned in S. 34(1A), but in respect of the income of that period notices could be legally issued after 31st March, 1956, under S. 34(1)(a). It has been further stated in the returns that the petitioner did not produce any account books at any time during the period 1939 to 1950. that he produced them for the first time in the assessment proceedings for the year 1950 -51, that in those proceedings he also gave a balance -sheet showing his assets and liabilities, that the petitioner's capital as disclosed by the balance -sheet and the various dispositions made by him between 1939 to 1949 and estimated capital according to the earnings as disclosed by the petitioner during the assessment years in question, showed a clear gap of Rs. 55 lakhs as representing "excess wealth" which could not be accounted for and which was income that had escaped assessment and had not been assessed to tax. So also the petitioner's account with the New Premier Mills, Bombay indicated that he had earned during the years in question at least Rs. 28 lakhs, and not only Rs. 11, lakhs as disclosed by him in the assessment proceedings, that, therefore, there was sufficient reason for the IT authorities to believe that income, profits and gains had escaped assessment in the assessment years in question because of the failure of the applicant to disclose fully and truly all material facts necessary for the assessment for those years, and that it was after the ITO had recorded his reasons in writing and after the Central Board of Revenue had satisfied itself on the reasons recorded that notices under S. 34 of the Act were served on the petitioner. According to the respondentITO, the notices issued to the petitioner in no way prejudiced him as the petitioner is entitled to explain his accounts and satisfy the respondent that there was no failure on his part to disclose truly and fully all the material facts necessary for the assessment, and that no income had escaped assessment.