This is an application filed under article 226 of the Constitution of India for the issue of a writ of prohibition directing the respondent to refrain from reassessing the income for the year 1956-57. It arises in the following circumstances :
The petitioner who carries on money-lending business was assessed to a particular tax for the year 1956-57. The petitioner had filed the return and produce the account books and detailed money-lending statements. It is only on the basis of these returns and the statements and the account books that the assessment was made for the year on 9th July, 1956.
After a lapse of a few years the impugned notice was given by the respondent on 19th December, 1964, under section 147 of the Income-tax Act, 1961, (hereinafter called the Act), proposing to reassess the income for the assessment year 1956-57. The validity of the notice is challenged mainly on the ground that the requirements of section 147(a) have not been satisfied, before the respondent assumed jurisdiction to issue notice for reassessment. It is contended by the petitioner that during the assessment of all these years she has been producing account books and money-lending statements in detail. She also produced every information relating to the agricultural income. The Income-tax Officer while making assessment accepted these statements as correct. According to her there is no relevant material on the basis of which the Income-tax Officer could reasonably believe that there was non-disclosure on the part of the petitioner in regard to some relevant material and that, a consequence, there has been some escarpment of tax.
In his counter the Income-tax Officer gave all the relevant facts which, in substance, are not in dispute. He states that the petitioner started money-lending business in 1946. In 1947 she acquired shares worth Rs. 30,000 in Motu Industries, a private limited company, in which her husband was substantially interested. In 1950-51 the petitioner was assessed for the first time and the Income-tax Officer left a note that he had examined the accounts for the accounting year. As the income for the first two years was below the taxable minimum, no assessments were made. For the subsequent assessment years the petitioner was assessed only for money lending business. It is stated in the counter that year after year the assessee had filed along with the return of income a statement showing the particulars of amounts outstanding at the beginning of the year, fresh advances in the year, realisations during the year by way of principal and interest and the amount outstanding at the end of the year. The petitioner, however, did not file the trial balance or balance-sheet, not did she show the cash balance on the hand at the end of each year. It was contended that the capital investment of the assessee by 31st March, 1949, had swelled to Rs. 61,000. The lent capital went on increasing thereafter and reached the maximum of Rs. 2,31,482 by 31st March, 1962. It is from these date that year to years and the same was not commensurate with the income assessed for the various year. In the course of the assessment proceedings for the year 1958-59 the assessee was required to explain the accretions in the outstanding from Rs. 61,000 on 1st April, 1949, to Rs. 2,32,273 on 1st April, 1957, together with cash balance on the opening day of each of the accounting years. The petitioner, however, furnished particulars of lands owned by her and the agricultural income credited in her books of account during the accounting years 1954-55 to 1956-57, but she did not furnish such information for the earlier year, as she pleaded that the books are not available. According to the assessee she owned acs. 2.82 cents of land and gets substantial income out of it. Apart from that, it was contended that her sister who owns acs. 36.23 cents. of land has been giving the agricultural income to the assessee as she had no children of her own.
It is further stated in the counter that, since the assessee had been adopting a non-co-operative attitude, the respondent arrived at a cash balance of Rs. 21,983 on 31st March, 1956, in view of the particulars mentioned in the counter. It is, however, conceded in the counter that during the proceedings of the assessment for the year 1957-58 the records supplied by the petitioner showed a cash balance of Rs. 38,414 on 1st April, 1956.
It is on the basis of these facts that it is stated in the counter that the respondent had reason to believe that as a result of omission or failure on the part of the assessee to disclose fully and truly all material facts, the income was under-assessed. He, therefore, applied to the Commissioner for necessary permission under section 148 of the Act. The Commissioner granted the sanction and consequently a notice under section 147(a) of the Act for reassessment for the year 1956-57 was issued to the assessee. The counter disputes the assertions made by the petitioner in the affidavit. It is on the basis that the petitioner did not file the trial balance or balance-sheet which is an important statement, nor she disclosed the cash balance both at the beginning and at the end of the year, that the Income-tax Officer thought that three is a reasonable ground for issuing a notice under section 147(a). In regard to agricultural income it is conceded that it was taken into account in arriving at the unexplained increase in the cash balance at the end of the accounting year, 31st March, 1956. It is not disputed that on 20th December, 1961, the petitioner furnished particulars of agricultural income, which were called for the by the Income-tax Officer and that the Income-tax Officer was satisfied with the explanation offered by the petitioner. This fact, however, is characterised as irrelevant in the counter. It is no doubted that the agricultural income was brought into the account books, but the only dispute, according to the counter, is with regard to the increase in the cash balance at the end of the accounting year relevant for the assessment year 1956-57.
The short question on the basis of the facts extracted above from the counter which falls for determination is whether the Income-tax Officer was justified in assuming jurisdiction under section 147(a) of the Act to reassess the income for the year 1956-57.
Now, according to section 147, if the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, he may assess or reassess such income for the assessment year concerned.
A close and careful reading of that section would disclose that if the Income-tax Officer has reason to believe that (1) there has been omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for true assessment for that year, and (2) because of that, income chargeable to tax has escaped assessment for that year, he can reassess the income for that year. Unless both these things co-exist, it is plain that the Income-tax Officer will have no power to reassess the income for which an assessment has already been made. In other words, these are jurisdictional facts, the existence of which alone confers jurisdiction on the Income-tax Officer to proceed under section 147(a) of the Act. It is now a well-accepted erroneous decision on a matter on which its jurisdiction depends. If a certain state of facts has to exist before an inferior tribunal assumes jurisdiction, the tribunal has power to enquire into the facts in order to decide whether or not in has jurisdiction, but it cannot certainly give itself a jurisdiction by wrong decision upon these primary or elementary facts. The High Court by means of proceedings by certiorari can always enquire into the correctness of the decision in regard to jurisdictional facts. That being preliminary or collateral question, any determination of the Tribunal in regard to its own jurisdiction is always reviewable by this court : see Rajagopal Reddy v. Kumaraswamy Reddy. That this view is correct is also supported by a recent decision of the Supreme Court in Madhya Pradesh Industries Ltd. v. Income-tax Officer.
Let me then see whether in this case there is any material on the basis of which the Income-tax Officer could come safely to the conclusion that he has reason to believe, firstly, that there has been non-disclosure the income charged lie to tax has escaped assessment for the year 1956-57. It is not in dispute that the petitioner has been submitting returns year after year, and along with them she also was filling money-lending statements every year showing the date of investment, the nature of investment in promotes or mortgage, etc., the total investment at the begins of the year, the amount collected during the year towards principal and interest separately, fresh investments during the year and the total investment at the end of the year. She was also producing the account books. Whenever she was required to give statements in regard to agricultural income, she gave the relevant and necessary particulars, which were accepted by the assessing officer concerned. Now, the only accusation made in the counter is that the petitioner did not file in any year the trial balance and omitted to show the cash balance on hand. Upon this alleged non-disclosure it contended that the Income-tax Office can reassess the growth in the capital income which is disproportionate with the income shown by the assessee years after year. It is not, however, in dispute that she has been shown every year the total investment which she had made in her business of moneys-lending. The Income-tax officer was aware that the total outlay of the money-lending business has been growing year after year. There was, therefore, no non-disclosure in so far as the growth of the capital was concerned. In fact in some years the Income-tax officer made enquiries to find out as to how the capital has grown and that is why enquiry is in regard to agricultural income were made made. What is now sought to be enquired is how the capital has grown from Rs. 61,000 to 2,32,000 and odd during a period of a for years. I fail to see how the non-disclosure of trial balance or cash on hand can form the basis for re-enquiring the causes of the growth in the capita invested by the petitioner in money-lending. True and full disclosure in regard to growth was already there and it was never object to. Nothing was shown to me as to how the trial balance on cash on hand year after year would explain or satisfy the Income-tax office in regard to the growth of the capital. That the capital has been growing except in a few years was well with in the knowledge of the Income-tax officer. He had drawn certain inferences from that. Merely because the new Income-tax Officer now feels that the correct inference was no drawn or because of the omission to furnished the trial balance and show cash on hand, he cannot now go into the question as to how the capital has swollen. I do not think that the alleged on-disclosure has anything to do with the question which is now sought to be enquired into. It is also not wholly true that the cash on hand was not shown. It is evident from the counter itself that for a few years at least the opening and closing balance in regard to cash was shown. Curiously the cash balance as found by the Income-tax officer now is only Rs. 21,000 where as from the returns and the statements submitted by the petitioner it was over Rs. 38,000 much more than what is now assessed natively. I am, hereof satisfied that merely because for some year cash on hand was not shown or the trial balance was not furnished, the Income-tax officer can now reassess the income for the years 1956-57. Neither that allegation is wholly true nor it is so materially relevant that it can from the basis to contended that there has been non-disclosure of relevant material facts. In any case it is not urged in the counter that income chargeable to tax has escaped assessment for the relevant year. What is now sought to be done is a fishing or roving enquiry into the whole questions to how the capita has grown with a hope that it might land the Income-tax Officer some where where from he can find out the income chargeable to tax has escaped assessment for the relevant year. I do not think that it is permitted under section 147(a) of the Act. It cannot, therefore, be validly argued that there was no disclosure of full and true material facts necessary for the assessment for the year 1956-57. The cash on hand or the trial balance could not have made any difference in regard to the assessment completed in the year 1956-57. The intention of the Income-tax officer seems to be clear. He wants to find out how and why the capital has grown with a hope that he might get some material on the basis on which he can find out as to whether income chargeable to tax in that year has escaped assessment. I do not think that is permissible under the section. since the two requirements of section 147 of the Act are not satisfactorily established in this case, even assuming that all the facts Income-tax Officer was wrong in determining that there has been a non-disclosure in regard to some relevant material facts and that income chargeable to tax has escaped assessment. I have already stated that by wrong decision he cannot give into himself a jurisdiction depends upon the existence of certain facts. I am not impressed with the arguments that the petitioner can go and represent to the Income-tax Officer to determine on the material available with him whether the two requirement of the section exists before he issues the notice. Once he issues the notice for reassessment, it would be deemed that he has given jurisdiction to himself by determining those questions. If he has decided that wrongly this court can certainly interefere and prohibit him from exercising jurisdiction so wrongly assumed. I would for the reason stated above, allow this writ petition and issue the write asked for. In the circumstances of the case, however, I make no order as to costs. Advocate s fee Rs. 100.
Writ petition allowed.