MD BASHIR Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE facts in this case are shortly as follows : One Hazi Poonoomiah, since deceased, was a wealthy Muslim inhabitant of Gazipur in U.P. He had a son, Hazi Saffiullah. Saffiullah had seven sons, Md. Shamsul Haque, Md. Ibrahim, Md. Jalil, Md. Sagir (since deceased), Md. Vakil, Md. Khalil and Md. Bashir, the petitioner in this case. THE other applications are by some of the persons above mentioned. THE Matter No. 210 of 1960 is by Md. Vakil. THE Matter No. 213 of 1960 is by Md. Khalil and the Matter No. 214 of 1960 is by Md. Jalil. THE facts and the law involved in these applications are similar and they have been heard together. THE brothers carried on and still carry on business in partnership under the name and style of M/s Shamsul Haque and Bros. For the assessment year 1946-47 the firm of M/s Shamsul Haque and Bros., Bander bazar, Sylhet, described as an unregistered firm, was assessed by the ITO, Sylhet, in Pakistan, on or about 29th Feb., 1948. THEre was a similar assessment for the asst. yr. 1947-48. For the year 1947-48 the firm of Shamsul Haque and Bros., P. 31, Ganesh Chandra Avenue, Calcutta, described as an unregistered firm was assessed by the ITO, Calcutta, District III(I) on or about 18th April 1949. THEre was a similar assessment for the year 1948-49, on the year 19th Feb., 1948. THE assessment order at Calcutta for the year 1947-48 states that the firm had so long been assessed by the ITO, Sylhet, but since the assessment for the year 1947-48 was not made prior to the date of partition, i.e., 15th Aug., 1947, the firm should have been assessed in India with regard to the income from the properties situated in India. A notice under s. 34 was, therefore, issued and thereafter return was filed and assessment made. It is mentioned in the assessment order that the firm had a stationery shop (wholesale and retail) at Sylhet. THE income of the Sylhet business was assessed by estimation for rate purposes. A similar assessment was made for the year 1948-49. In Jan., 1946, the petitioner encashed in Calcutta, through the Habib Bank, a sum of Rs. 1,10,000 in high denomination notes, presumably under the Denomination Ordinance, under which high denomination notes were abolished and they could be encashed only within a specified time. Similarly, Md. Vakil encashed notes for Rs. 95,000, Md. Khalil encashed notes for Rs. 3,10,000 and Md. Jalil encashed notes for Rs. 1,18,000. In the declaration form necessary for encashment, it was stated that the money represented the life's saving of the brothers. In March, 1951, a notice was issued under s. 34 of the Indian IT Act upon the petitioner by the ITO, District III(I), Calcutta, asking the petitioner to submit a return for the asst. yr. 1946-47. It must be remembered that this notice was served and the assessment sought to be made, not of the firm, but of the petitioner individually. Similar notices were served on the petitioners in the other cases. THE assessees refused to file a return on the ground that the notice was invalid. Although they filed no return, some of them attended at the hearing and on the 20th March, 1952, an assessment was made by which this sum of Rs. 1,10,000 encashed by the petitioner was held to be his income from an undisclosed source. From this order of assessment the petitioner preferred an appeal on the 8th April, 1952, before the AAC. By his order dt. 24th Jan., 1956, the AAC rejected the contention that the ITO, District (III) (I) had no jurisdiction to issue the notice under s. 34 or to make the assessment. THE AAC, however, considered certain facts that should be investigated and he remanded the case to the ITO to report his finding within three months from the date of the receipt of the order. THE facts are the same in the other cases, where also the notes encashed have been held to be income of the brothers from undisclosed sources and assessments made accordingly. THEreafter, certificate proceedings were taken and this rule was issued on the 6th Sept., 1960, upon the respondents to show causes why a writ in the nature of certiorari should not be issued quashing and/or setting aside the assessment order dt. 20th March, 1952, and the order of the AAC dt. 24th Jan., 1956, and why a writ in the nature of mandamus should not be issued restraining the respondents from taking any further steps in the said income-tax proceedings or for the recovery of the said tax. Similar rules have been issued in the other applications.

(2.) IN order to understand the order of remand, it is necessary to go into certain facts. Although no return was filed and the assessment was a best judgment assessment, the petitioner attended the assessment proceedings. Apart from the question of jurisdiction, the explanation that he purported to give was as follows : He said that his grandfather, Hazi Poonoomiah, was a wealthy Muslim inhabitant of Gazipur in U.P. On or about 4th Jan., 1930, he executed a Wasiatnama whereby he gave to his grandsons 2,630 tolas of gold, 4,675 sovereigns, 2,425 gold mohurs, gold ornaments weighing 1107.15 tolas and notes and cash worth Rs. 47,890. This was handed over to their father, Hazi Safiullah in trust. It was, however, not distributed by Hazi Safiullah for thirteen years. IN 1943, these movables were handed over to the sons by their father. After that, a joint account was kept and various properties in Calcutta were purchased. It is stated that this encashment of high denomination notes for Rs. 1,10,000 and the other amounts were out of the said wealth left by their grandfather, which was transformed into high denomination notes. The ITO went into this aspect of the matter and, for several reasons given in his assessment order, held that the story of the Wasiatnama and the source of the high denomination notes should not be believed. The reasons are set out in the assessment order and summarised in the order of the AAC. The following are some of the conclusions reached by the ITO :

(3.) IT is argued that Rankin C.J. has definitely laid down the law, namely, that no reassessment under s. 34 may be done unless there has been a prior assessment in the normal way and that this view has been accepted by the Privy Council and the Supreme Court. In my opinion, this is an over-simplification of the legal position, which will have to be further investigated. The first thing to be remembered is that the decision of Rankin C.J., which has certainly found support from the Privy Council and the Supreme Court, was made under s. 34 as it stood before the amendment of 1939 and 1948. Before the amending Act of 1948, s. 34 did not contain the equivalent of s. 34(1) (a). Sec. 34 as it stood before the amendment of 1939 was as follows :