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Explanation. STA |
Production before the Income tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income tax Officer will not necessarily amount to disclosure within the meaning of this, section. STA |
In Calcutta Discount Company Ltd. vs Income Tax Officer Companies Dist.1 and another(1), this Court ruled that before an Income tax Officer could issue a notice under section 34 (1) (a) of the Act, two conditions must co exist, namely, that he must have reason to believe (1) that income, profits or gains had been under... |
It was observed therein that where, however, the Income tax Officer has prima facie reasonable grounds for believing that there has been a nondisclosure of a primary material fact, that by itself gives him the jurisdiction to issue a notice under section 34 of the Act and the adequacy or otherwise of the grounds of suc... |
It is for the assessee who wants to challenge such jurisdiction to establish that the Income tax Officer had no material for such belief. PRE |
Speaking for the majority Das Gupta J. observed therein "To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. PRE |
The first is that the income tax Officer must have reason to believe that income, profits or gains chargeable to income tax have 'been under assessed. PRE |
The second is that he must have also reason to believe that such "under assessment" has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts n... |
Both these conditions are conditions precedent to be satisfied before the Income tax Officer could have jurisdiction to issue a notice for the assessment or re assessment beyond the period of four years but within the period of eight years, from the end of the year in question." PRE |
Proceeding further the learned judge observed "The position therefore is that if there were in fact some reasonable grounds for thinking that there had been any non disclosure as, regards any primary fact, which could have a material bearing on the question of 'under assessment ' that would be sufficient to give jurisd... |
Whether these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the (1) ; 273 court 's investigation. PRE |
In other words, all that is necessary to give this special jurisdiction is that the Income tax Officer had when he assumed ' jurisdiction some prima facie grounds for thinking that there had been some non disclosure of material facts". PRE |
Shah J. (one of us) in his dissenting judgment has observed that the expression "has reason to believe" in section 34(1) (a) of the Indian Income Tax Act does not mean a purely subjective satisfaction of the Income tax Officer but predicates the existence of reasons on which such belief has to be founded. PRE |
That belief, therefore cannot be founded on mere suspicion and must be based on evidence and any question as to the adequacy of such evidence is wholly immaterial at that stage. Ratio |
He further observed that where the existence of reasonable belief that there had been under assessment due to non disclosure by the assessee, which is a condition precedent to exercise of the power under section 34(1)(a) is asserted by the assessing authority and the record prima facie supports its existence, any enqui... |
In section Narayanappa and ors.vs Commissioner of Income Tax, Bangalore(1), this Court held that two conditions must be satisfied in order to confer jurisdiction on the Income tax Officer to issue the notice under section 34 of the Act in respect of assessments beyond the period of four years, but within a period of ei... |
Both these conditions are conditions precedent to be satisfied before the Income tax Officer acquires jurisdiction to issue a notice under the section. PRE |
If there are in fact some reasonable grounds for the Income tax Officer to believe that there had been any non disclosure as regards any fact, which could have a material bearing on the question of under assessment, that would be sufficient to give jurisdiction to the Income tax Officer to issue the notice under sectio... |
Whether these grounds are adequate or not is not a matter for the Court to investigate. Ratio |
In other words, the sufficiency of the grounds which induced the Income tax Officer to Act is not a justiciable issue. Ratio |
It is of course open for the assessee (1) 63, I.T.E., 219 274 to contend that the Income tax Officer did not hold the belief that there had been such nondisclosure. Ratio |
In ' other words, the existence of the belief can be challenged by the assessee but not sufficiency of the reasons for the belief. Ratio |
Therein it was observed that the expression "reason to believe" in section 34 does not mean purely subjective satisfaction on the part of the Income tax Officer. Ratio |
The belief must be held in good faith : it cannot be merely a pretence. Ratio |
It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the, purpose of the section. Ratio |
To this limited extent the action of the Income tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law. Ratio |
The same view was again expressed by this Court in Karitamani Venkata Narayana and Sons vs First Additional Income Tax Officer, Rajahmundry (1). Ratio |
In these cases, the company in its writ petitions had repudiated the assertion of the Income tax Officer that he had reason to believe that due to the omission or failure on the part of the company to give material facts, some income had escaped assessment. Ratio |
Under those circumstances one would have expected the officer who issued the notices under section 34(1) (a) to file an affidavit setting out the circumstances under which he formed the necessary belief. Ratio |
We were told that one Mr. Pandey had issued the notices in question. Ratio |
That officer had not filed any affidavit in these proceedings. Ratio |
The proceedings recorded by him before issuing the notices have not been produced nor his report to the Commissioner or even the Commissioner 's sanction has not been produced. Ratio |
Hence it is not possible to hold that the Income tax Officer had any reason to form the belief in question or the reasons before him were relevant for the purpose. Ratio |
We have no basis before us to hold that the Income tax Officer had jurisdiction to issue, the impugned notices. Ratio |
Hence the proceedings taken by him have to be quashed. Ratio |
For the reasons mentioned above, we allow these appeals, set aside the order of the High Court and quash the proceeding$ taken under section 34 (1) (a) of the Act. RPC |
The respondent shall pay the costs of these appeals hearing fee one set. RPC |
Y.P. Appeal allowed. RPC |
Appeal No. 90 of 1953. FAC |
Appeal under Article 132(1) of the Constitution of India from the Judgment and Order dated the 29th August, 1952, of the High Court of TravancoreCochin at Ernakulam in Original Petition No. 51 of 1952. STA |
K.Thomas and M. R. Krishna Pillai, for the appellant. FAC |
Mathew P. Muricken, Advocate General for the State of Travancore Cochin (T. R. Balakrishna Ayyaiand Sardar Bahadur, with him), for the respondent. FAC |
November 25. FAC |
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C. J. FAC |
This appeal by leave of the High Court of Judicature of TravancoreCochin at Ernakulam is directed against an order of a Full Bench of that court dismissing an application for the issue of a writ of certiorari quashing the order of the Government of the united State of TravancoreCochin removing the appellant from servic... |
The facts giving rise to the petition and the appeal are these: The petitioner entered the service of the erstwhile Travancore State in the year 1928. FAC |
By promotion he became the Executive Engineer, Electricity Department in August 1937 and subsequently Electrical Engineer to Government in October 1944. FAC |
He was the Electrical Engineer to Government on the 1st July 1949 when the States of Travancore and Co chin were integrated by a Covenant entered into between the rulers of the two States. FAC |
By an order of the Government of the united State of Travancore Cochin dated the 11th August 1949, he was appointed as the officiating Chief Engineer (Electricity) in the State. FAC |
In or about September 1949 the Government of the 1014 united State received serious complaints about the conduct and dealings of some of their senior officers and allegations of corruption, communalism, etc. were made against them. FAC |
In December 1949 the Council of Ministers decided to take action against the appellant on a number of charges indicated in the resolution. FAC |
On the 22nd December 1949, immediately after this resolution was passed, the petitioner was informed that he was suspended from service pending enquiry and he was requested to hand over charge to Sri K. P. Sridharan Nair forthwith. FAC |
The petitioner complied with this order and handed over charge as directed. FAC |
On the 21st March 1950 the following notification was issued: "Whereas Government are of opinion that there are sufficient grounds for making a formal and public inquiry into the truth of the imputation of misconduct of the officers mentioned below: Government, under section 3 of the Travancore Public Servants (Inquiri... |
Government are further pleased under section 4 of the said Act to nominate Sri T. R. Balakrishna Ayyar, Government Pleader, High Court, to prosecute the inquiries on their behalf. STA |
The inquiries shall be conducted as early as possible. FAC |
The officers referred to in para. FAC |
1 supra are: I. . . . . . . 2. FAC |
Sri P. Joseph John". FAC |
The petitioner was informed by notice of the 24th April 1950 about this inquiry. FAC |
The notification was signed by Shri K. G. Menon, Chief Secretary to Government. FAC |
Mr. Justice Sankaran took charge as Enquiry Commissioner and on the 11th May 1950 forwarded the articles of charges against the petitioner, the list of witnesses and the list of documents placed before him together with the notice regarding the commencement of the enquiry to Shri K. section Raghavan, Secre 1015 tary to... |
A few days before the date fixed for the commencement of the enquiry the petitioner made an application to the Enquiry Commissioner for a direction to the Prosecutor to produce the files and papers relating to the various charges in the office of the Commissioner and for permission to him and his counsel to inspect the... |
This application was allowed and he and his advocate were allowed to inspect the relevant files in the presence of the prosecutor or his deputy. FAC |
On the 20th May 1950 when the enquiry commenced, the petitioner pleaded not guilty to the charges by a written statement. FAC |
He was defended during the enquiry by Shri K. P. Abraham, a leading member of the Bar. FAC |
A preliminary objection was taken to the Tribunal 's jurisdiction on the basis of Article 20 of the Covenant entered into between the rulers of Tra vancore and Cochin and it was contended that the proceedings before the Commissioner were criminal in nature and could not be commenced without the sanction of the Rajpramu... |
This objection was not immediately decided by the Commissioner but was ultimately overruled. FAC |
On the 22nd November 1950 the peti tioner submitted detailed answers in writing to the various charges. FAC |
The enquiry concluded on the 27th December 1950 and the Commissioner submitted his report to Government on the 17th February 1951. FAC |
Some of the charges were held proved, while others were held not established. FAC |
On the 5th July 1951 the following communication was sent to the petitioner by the Chief Secretary to Government: "I am to enclose here with a copy of the above report and to point out that the Government agree with the findings of the Inquiring Commissioner on the several charges against you. FAC |
Government also agree with the Commissioner that the objections raised by you challenging the validity of the en quiry itself are not tenable. FAC |
As against the 26 charges framed 1016 against you, the nine charges noted in the margin have not been established and they are accordingly dropped. RLC |
As regards Charge No. IX in view of the extenuating circumstances, the irregularity is condoned. RLC |
It is evident from the remaining charges, which have been established, that you have misused your official position as Electrical Engineer to Government and shown undue favouritism at the expense of State revenues, to private firms and issued materials from Government stores to private companies and individuals in viol... |
It is also evident that departmental stores and departmental lorries have been diverted for your personal use in a number of cases. RLC |
(Vide List B). RLC |
You are also found guilty of having shown defiance and insubordination towards the authority of the Government by your refusal, in connection with the supply of power to the Nagercoil Electric Supply Corporation, to supply certain particulars which were called for and which it was your duty to furnish and by your refus... |
The Government therefore propose to remove you from service from the date on which you were placed under suspension with permanent bar against future reappointment in service. RLC |
You are requested to show cause within 15 days of the date of receipt of this notice with enclosures why action should not be taken against you as proposed in paragraph 4 above". RLC |
The petitioner on receipt of this notice applied for time till the 10th September 1951 for showing cause. RLC |
Time as prayed for was allowed. RLC |
On the 10th September 1951 when the time granted at his own request 1017 was due to expire, he again applied for further time till the 10th November 1951. FAC |
He was allowed further time till the 24th September 1951. FAC |
On that date he again asked for further time till the 31 st October 1951 but this request was not granted. FAC |
In spite of the fact that the petitioner was granted the time which he originally asked for and this was further extended by a fortnight, he furnished no explanation and did not show any cause against the notice issued to him. FAC |
The petitioner having failed to avail himself of the opportunity to show cause against the action proposed against him, a draft of the proceedings relating to the enquiry was submitted to H. H. the Rajpramukh oil the 30th September 1951 and thereupon an order was issued for his removal from service from the date of sus... |
The order was in proper form as having been made by H. H. the Rajpramukh and was authenticated by the Chief Secretary to Government. FAC |
This order is dated the 1st October 1951. FAC |
It may be mentioned that before the papers were submitted to H. H. the Rajpramukh, the report of the Commissioner was submitted to the Public Services Commission for their consideration. FAC |
The Public Services Commission supported the action which the Government proposed to take against the petitioner. FAC |
On the 9th October 1951 the petitioner was removed from service with effect from the 26th December 1949. FAC |
Two months after the order of his removal, the petitioner submitted an ap plication for a reconsideration of the order removing him from service. FAC |
This was rejected by an order dated the 25th January 1952. FAC |
On these facts and in these circumstances an application was made before the High Court of Travancore Cocliin at Ernakulam on the 2nd June 1952 praying that the court may be pleased to issue a writ in the nature of certiorari or any other writ, directions or orders calling for the records relating to the orders dated t... |
It was contended in the application 1018 that the applicant had no reasonable opportunity of showing cause against his removal and that he was entitled to show cause twice, once after he was found guilty and next after the punishment had been decided and that the denial of this right rendered the order of dismissal ill... |
It was further contended that the consultation with the Public Services Commission was not held in terms of the provisions of procedure for disciplinary action against Government servants and prescribed in Article 320, sub section 3(c) of the Constitution of India. FAC |
A number of other grounds were also taken against the order of dismissal. FAC |
The High Court negatived all the contentions of the petitioner and dismissed the petition. FAC |
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