BIJU PATNAIK Vs. INCOME TAX OFFICER, CENTRAL CIRCLE

JUDGEMENT

(1.) This is an appeal against a judgment of Chittatosh Mookerjee J. delivered on February 7, 1973, on an application under Article 226 of the Constitution. The Appellant prayed for the issue of relevant writs for quashing the notices dated July 31, 1965 and September 17, 1965, issued under Ss. 148 and 142(1) of the Income -tax Act, 1961, for the assessment year 1957 -58. The learned trial Judge has dismissed the application.

(2.) The Government of Orissa on October 10, 1952, granted a working permission to the Appellant to work certain mines for extraction of manganese ores for a period of one year from the date of delivery of possession of the land. The permission was renewable until finalisation of the terms and conditions of the deed of lease. The Government on January 14, 1954, granted another working permission to the Appellant to extract iron ores from the same area. A further working permission was granted by the Government of Orissa in respect of iron ores on the August 30, 1955.

(3.) On March 19, 1956, B. Patnaik Mines (P.) Ltd. was incorporated and one of the objects of the company was to purchase or otherwise acquire as a going concern the business and goodwill of the firm of B. Patnaik Mine Owner as carried on by B. Patnaik, the Appellant. On March 23, 1956, B. Patnaik Mines (P.) Ltd. passed a resolution to the effect that the assets and goodwill of B. Patnaik Mine Owner would be taken over on or before March 31, 1956, on payment of Rs. 15 lakhs payable in suitable instalments. The agreement between the Appellant and Messrs B. Patnaik Mines (P.) Ltd. was executed, according to the aforesaid resolution, on March 23, 1956. Thereafter, there was correspondence between the Government of Orissa and B. Patnaik Mines (P.) Ltd. Ultimately, the Respondents' case is, the transfer was approved by the Government of Orissa in accordance with the Mining Concession Rules on November 3, 1956. On January 21, 1959, the assessment of the Appellant for the assessment year 1957 -58 was completed by the Income -tax Officer, 'A' Ward, Cuttack and the total income was determined at Rs. 39,950. In this assessment the Income -tax officer did not seek to impose any capital gains tax on the sum of Rs. 15,00,000 which the Appellant had received on account of goodwill for transfer of his business aforesaid to B. Patnaik Mines (P.) Ltd. The reason was that the relevant provisions of Sec. 12B of the Indian Income -tax Act, 1922, attracting capital gains, came into force with effect from April 1, 1957. And since the Appellant's case was that the transfer took place on March 31, 1956, the Income -tax Officer concerned did not impose any capital gains tax. The sum of Rs. 15,00,000 received in consideration of transfer of goodwill was not also shown in the Appellant's income -tax return for that year. In July 1965 the Income -tax Department wanted to issue a notice of reassessment under the provisions of Ss. 147 and 148 of the Income -tax Act, 1961. Sub -section (2) of Sec. 148 requires that the Income -tax Officer shall, before issuing any notice under this section, record his reasons for doing so. The reasons recorded by the Income -tax Officer, Spl. IV Circle, Cuttack, dated July 2, 1965, are as follows: