DALMIA R Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) FACTS giving rise to this writ may briefly be stated as unde : The petitioner, Ram Kishan Dalmia, was assessed for the year 1950-51 by the Income-tax Officer and, therefore, during the course of assessment for the subsequent years, certain information came to the notice of the Income-tax Officer, as a result of which, after getting the sanction of the Income-tax Commissioner, he issued notices under section 34 of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act), in March, 1959, stating that the income of the assessee-petitioner assessable to income-tax for the year ending 31st March, 1951, has escaped assessment or has been under-assessed and that it was proposed to assess/reassess the income that has escaped assessment or has been under-assessed, and he called upon the petitioner to deliver within 35 days of the receipt of this notice, a return in the form which was attached with the notice. It was against these notices that the present petition has been filed.

(2.) THE main contention on behalf of the petitioner was that, in fact, the conditions precedent required for the issue of the notice under section 34 of the Act have not been satisfied and that no definite information came to the notice of the Income-tax Officer after the date of the assessment and as such the notices were without jurisdiction. In paragraph 4 of the petition it was further urged that when the petitioners representative appeared before the Income-tax Officer, he was told that proceedings were initiated with a view to adding certa in sums of money and deleting certain other sums, credit for which had been allowed and it was urged that the Income-tax Officer, reassessing under section 34, could not either add certain sums or delete certain others, for which credit had been given to the petitioner. I feel that this question of details cannot be gone into in the present petition. If the Income-tax Officer has jurisdiction to issue notice under section 34 and take the proceedings threatened to be taken, these and other matters can be urged before him, and in case he gives a decision, which, according to the petitioner, is not correct, there are remedies provided in the Income-tax Act itself for getting redress from the higher authorities. I would, therefore, only deal with the main point urged as to whether, in the circumstances of the case, the action of the Income-tax Officer in issuing the notice is warranted under the law.

(3.) THE order for the assessment year 1950-51 which is desired to be reassessed was passed on March 31, 1955, by the Income-tax Officer, Special Investigation Circle. This order is annexure "E". A number of shares owned by Messrs. Bharat Bank Limited were contracted to be purchased by the assessee under an agreement dated 5th of February, 1948. THEse shares were in respect of Dalmia Investment Company Limited, Dalmia Cement and Paper Marketing Company Limited and Lahore Electric Supply Company Limited. THE consideration agreed to be paid for them was over Rs. 44,00,000. If the delivery of the shares was not taken by March 31, 1948, it was provided that the consideration would bear 6 per cent. interest from April 1, 1948, till the date of actual delivery. It was further provided that if the delivery was taken, latest by March 31, 1951, the Bharat Bank would be entitled to sell the undelivered shares at the prices then prevailing and hold the assessee liable for the difference. THEse shares were actually taken delivery of on dates between February, 1952, and September, 1952. Thus, for the purpose of the assessment for the year 1950-51 these shares were held by the assessee. A considerable amount became due on the amount as interest on the unpaid price and this was taken into account by the Income-tax Officer taking the transaction of the sale of the shares to be a business transaction. Later on, while making assessment for the year 1953-54, this is what is stated by the Income-tax Office :