Law: Income Tax Act, 1922

Section: 34,34(1A)

Indian Income tax Act, 1922 (Xl of 1922)-Section 34(1A)-Reassessment-Reason to believe-Existence of materials on which belief must 176 based- Whether necessary-Held yes-Reasons themselves stated to be beliefs- Whether leads to self contradiction-Held yes-Expression "reason-to belier", meaning of In 1944, the assesse, who was a shareholder in a number of Companies and also director and Managing Director of various companies, sold his shareholding in the Associated Hotels for Rs. 20,65,705-Similarly, in 1949, he sold his holdings in another hotel. He disclosed to-the Income tax Officer during the assessment year 1945-46 the receipt of that sum, which was held to be a capital receipt. Subsequently, the Income tax Officer issued notices under Section 34(1A) of the Income Tax Act, 1922, in respect of assessment year 1940-41 to 1946-47, and inspite of the objection of the assessee that the officer had no juriSd1¢U0H to issue the notices, the officer made assessments in respect of the assessment years 1942-43, 1943-44, 1944-45 and 1945-46. On appeal the appellate Assistant Commissioner called for a report, inter alia, regarding what fresh material was before the Income Tax Officer to satisfy him that the sum of`Rs.20 lakhs which was previously treated as capital should be treated as income. In 1961, the assessee held a writ petition in the Calcutta High Court claiming that the only material before the officer consisted of the fact of the receipt of about Rs. 22 lakhs which had already been disclosed, and that there was no other material before him. The department merely denied this in its reply-affidavit. The High Court sustained a preliminary objection that because the assessee had filed appeals to the Appellate Assistant Commissioner he could not pursue they writ petition, and yet decided the question relating to the satisfaction of the preconditions under Section 34(1A). On appeal to the Supreme Court the department produced the report of the Income tax Officer to the Central Board of Revenue, which contained the following reasons: (i) The assessee who is or was at the relevant time a Managing director in about a dozen limited companies along with Oberois is…

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