Law: Income Tax Act, 1922

Section: 34

Section 148 of the Income-tax Act, 1961 [Corresponding to section 34 of the Indian Income-tax Act, 1922], read with Article 226 of the Constitution of India - Income escaping assessment - Issue of notice for - Assessment year 1953-54 - Whether when party claiming relief challenges on oath existence of conditions, which confer jurisdiction, and sets out facts which may, unless disproved, support his case, an order dismissing his petition in limine may not properly be made - Held, yes - Whether where assessee in a writ petition claimed that ITO had no power to issue notice under section 34 of 1922 Act, and that power was exercised not for any legitimate purpose for which it might be used, but for purpose of making a fishing enquiry and to review a previous order passed in favour of assessee, a rule upon ITO to show cause why order should not be set aside and an opportunity to authority whose action was challenged either to accept or deny facts alleged and to set out such other material facts as have a bearing on question, was at least called for - Held, yes FACTS The assessee-company was engaged in the business of mining manganese ore. The assessee appointed 'A' as its selling agent and paid certain amount as commission sales and claimed it as a revenue outgoing in the computation of its profits. The ITO made an order of assessment without expressly referring to the claim for allowance to Alloys. Subsequently the ITO issued a notice to the assessee in exercise of the power under section 34 of 1922 Act reciting that having 'reason to believe that' the income of the assessee assessable to income-tax for the assessment year 1953-54 had '(a) escaped assessment, (b) been under-assessed' for the issue of writs in the nature of prohibition or mandamus restraining the ITO fram taking any action or proceedings in enforcement or implementation of the notice. The High Court rejected the said petition in limine. On appeal to the Supreme Court; the assessee contended in issuing a notice under section 34(1)(a) of 1922 Act the ITO acted without jurisdiction and for a colourable purpose. HELD Jurisdiction to issue prerogative writs is designed to invest the High Court with…

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