INCOME TAX OFFICER Vs. MADNANI ENGINEERING WORKS LTD
LAWS(SC)-1979-1-44
SUPREME COURT OF INDIA (FROM: CALCUTTA)
Decided on January 04,1979

INCOME TAX OFFICER Appellant
VERSUS
MADNANI ENGINEERING WORKS LIMITED CALCUTTA Respondents





Cited Judgements :-

S P MOHAN SINGH VS. INCOME-TAX OFFICER [LAWS(P&H)-1983-1-4] [REFERRED TO]
MOHAN SINGH S P VS. INCOME TAX OFFICER [LAWS(P&H)-1983-1-17] [REFERRED TO]
ADITYA MILLS LIMITED VS. UNION OF INDIA [LAWS(RAJ)-1994-12-27] [REFERRED TO]
MAGNI RAM BAIJNATH VS. CENTRAL BOARD OF DIRECT TAXES [LAWS(PAT)-1982-8-1] [REFERRED TO]
CHUNNILAL SURAJMAL VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1985-8-7] [REFERRED TO]
RANCHI HANDLOOM EMPORIUM VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1998-8-46] [REFERRED TO]
SEWAK RAM VS. INCOME TAX OFFICER [LAWS(P&H)-2010-10-215] [REFERRED TO]
GREATER MOHALI AREA DEVELOPMENT AUTHORITY VS. DEPUTY COMMISSIONER OF INCOME TAX [LAWS(P&H)-2018-4-59] [REFERRED TO]
BANSILAL AND CO VS. PRABHU DAYAL, INCOME TAX OFFICER [LAWS(BOM)-1990-3-148] [REFERRED]
J P BAJPAI VS. COMMISSIONER OF INCOME TAX [LAWS(ALL)-2004-4-196] [REFERR ED TO]
Rawatmall Mohanlal VS. Income Tax Officer [LAWS(CAL)-2002-5-31] [REFERRED TO]
Peerless General Finance and Investment Co LTD VS. Deputy Commissioner of Income tax [LAWS(CAL)-2004-8-6] [REFERRED TO]
SADANA ELECTRIC STORES VS. COMMISSIONER OF INCOME TAX [LAWS(ALL)-2013-7-157] [REFERRED TO (SC);]
DILIP KUMAR CHANDRA VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1980-4-43] [REFERRED TO]
JAI BHAGWAN OM PARKASH VS. DIRECTOR OF INSPECTION [LAWS(P&H)-1992-3-34] [REFERRED TO]
KESAR ENTERPRISES LTD VS. STATE OF U P [LAWS(SC)-2011-7-55] [REFERRED TO]
THE LIFE INSURANCE CORPORATION OF INDIA VS. RENU DEVI [LAWS(PAT)-2016-12-76] [REFERRED TO]
LOKENDRASINGH VS. INCOME TAX OFFICER [LAWS(MPH)-1980-8-21] [REFERRED TO]
PRABHA RAJYA LAKSHMI VS. WEALTH TAX OFFICER [LAWS(MPH)-1982-6-2] [REFERRED TO]
RATAN INDUSTRIES PVT LIMITED VS. ADDITIONAL COMMISSIONER TRADE TAX [LAWS(ALL)-2004-1-8] [REFERRED TO]
ARUN KUMAR MAHESHWARI VS. INCOME TAX OFFICER [LAWS(ALL)-2004-12-237] [REFERRED TO]
SWAL LIMITED VS. UNION OF INDIA [LAWS(CAL)-2022-8-75] [REFERRED TO]
DIVEKAR S P AND A P DIVEKAR VS. COMMISSIONER OF INCOME TAX [LAWS(BOM)-1984-11-43] [REFERRED TO]
SIR SHADILAL ENTERPRISES LTD. VS. STATE OF U.P. AND ORS. [LAWS(ALL)-2010-4-329] [REFERRED TO]
ASSOCIATED PIGMENTS LTD VS. STATE OF U P [LAWS(ALL)-2012-4-123] [REFERRED TO]
SARVAMANGALA PROPERTIES VS. INCOME TAX OFFICER [LAWS(CAL)-1991-6-23] [REFERRED TO]
GAUTAM BUDDHA INTER COLLEGE AND ORS. VS. STATE OF U.P. AND ORS. [LAWS(ALL)-2016-7-18] [REFERRED]
NORTH END FOOD MARKETING PVT. LTD. VS. STATE OF U. P. [LAWS(ALL)-2021-8-181] [REFERRED TO]
KIRPA RAM RAMJI DASS VS. INCOME-TAX OFFICER A-WARD [LAWS(P&H)-1979-11-10] [REFERRED TO]
JAI SINGH VS. COMMISSIONER OF INCOME-TAX [LAWS(P&H)-1982-2-18] [REFERRED TO]
CHENNAI PETROLEUM OFFICERS ASSOCIATION INSIDE CPCL CAMPUS MANALI VS. CHENNAI PETROLEUM CORPORATION LIMITED [LAWS(MAD)-2011-12-103] [REFERRED TO]
V D S R RE ROLLING MILL VS. SPECIAL COMMISSIONER [LAWS(MAD)-2012-7-354] [REFERRED]
SHEO NARAIN JAISWAL VS. INCOME TAX OFFICER [LAWS(PAT)-1988-12-5] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ANAND C L [LAWS(KER)-1989-3-26] [REFERRED TO]
RAKESH AGARWAL VS. ASSISTANT COMMISSIONER OF INCOME TAX [LAWS(DLH)-1995-1-33] [REFERRED]
EVEREADY INDUSTRIES INDIA LIMITED VS. JOINT COMMISSIONER OF INCOME TAX ASSESSMENT [LAWS(GAU)-2000-3-47] [REFERRED TO : (1979) 118 ITR 1 (SC) : TC 51R.725]
COMMISSIONER OF INCOME TAX VS. GUPTA CABLES PVT LTD [LAWS(CAL)-1993-4-2] [REFERRED TO]
INCOME-TAX OFFICER VS. ELECTRO STEEL CASTINGS LTD [LAWS(CAL)-2003-7-31] [REFERRED TO]
OPG METALS & FINSEC LTD VS. COMMISSIONER OF INCOME TAX [LAWS(DLH)-2013-8-212] [REFERRED TO]
NEW EXCELSIOR THEATRE PVT LIMITED VS. NAIK M B ITO [LAWS(BOM)-1990-3-29] [REFERRED TO]
KHAN BAHADUR HORMASJI MANECKJI AND CO VS. SAHU B K IAC [LAWS(BOM)-1990-3-50] [REFERRED TO]
NIRMALKUMAR ASHOK KUMAR VS. GOPI K V INCOME TAX OFFICER [LAWS(BOM)-1990-8-32] [REFERRED TO : (1979) 118 ITR 1 (SC) : TC51R.725 AND]
EAST COAST COMMERCIAL COMPANY LTD VS. INCOME TAX OFFICER [LAWS(CAL)-1980-1-8] [REFERRED TO]
P ANAND AND SONS VS. COMMISSIONER OF SALES TAX [LAWS(ALL)-2003-12-79] [REFERRED TO]
RASIKLAL JIVANLAL SHAH VS. INCOME TAX OFFICER [LAWS(CAL)-1980-5-13] [REFERRED TO]
BASANTA RAM KEDARNATH VS. INCOME TAX OFFICER [LAWS(CAL)-1985-12-19] [REFERRED TO]
ADITYA MILLS LIMITED VS. UNION OF INDIA [LAWS(RAJ)-1984-7-6] [REFERRED TO]
SHIVA RICE MILLS VS. STATE OF PUNJAB [LAWS(P&H)-2023-11-83] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. BIHAR COTTON MILLS LIMITED [LAWS(PAT)-1986-2-8] [REFERRED TO]
DHANARAJ SINGH AND COMPANY VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1994-3-6] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. VISHISHTH CHAY VYAPAR LTD. [LAWS(DLH)-2015-12-79] [REFERRED TO]
ORACLE SYSTEMS CORPORATION VS. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II AND ORS. [LAWS(DLH)-2016-2-149] [REFERRED TO]
V I P INDUSTRIES LIMITED VS. INSPECTING ASSISTANT COMMISSIONER [LAWS(BOM)-1990-8-85] [REFERRED TO]
ASIAN P.P.G. INDUSTRIES LTD. VS. ADDITIONAL COMMISSIONER GRADE I, TRADE TAX, GHAZIABAD ZONE, GHAZIABAD AND OTHERS [LAWS(ALL)-2010-4-326] [REFERRED TO]
V P SAMTANI VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1981-3-18] [REFERRED TO]
BISWANATH PASARI VS. INCOME TAX OFFICER B WARD [LAWS(CAL)-1983-12-7] [REFERRED TO]
HARIPADA SAMANTA PRAMATHA NATH SAMANTA VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1980-2-27] [REFERRED TO]
INDIAN OIL CORPORATION VS. INCOME TAX OFFICER CENTRAL CIRCLE V CALCUTTA [LAWS(SC)-1986-5-28] [RELIED ON]
ALANKAR COMMERCIAL PRIVATE LIMITED VS. ASSISTANT COMMISSIONER OF INCOME TAX [LAWS(SIK)-1999-12-1] [REFERRED TO]
NARANG BROTHERS VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1988-4-27] [REFERRED TO]
SARAF TEXTILE MILLS PRIVATE LIMITED VS. UNION OF INDIA [LAWS(RAJ)-1999-4-10] [REFERRED TO]
Commissioner of Income Tax and another VS. N. Thippa Setty [LAWS(KAR)-2008-4-41] [REFERRED TO]
INCOME TAX OFFICER VS. DWARKA DASS AND BROS [LAWS(DLH)-1981-2-39] [REFERRED TO]
SUN PHARMACEUTICAL INDUSTRIES LTD VS. DEPUTY COMMISSIONER OF INCOME TAX [LAWS(GJH)-2013-7-612] [REFERRED TO]
AAYOJAN DEVELOPERS VS. INCOME TAX OFFICER [LAWS(GJH)-2011-2-218] [REFERRED TO]
AGARWAL G P VS. COMMISSIONER OF INCOME TAX ASSESSMENT [LAWS(ALL)-1994-3-94] [REFERRED TO]
NAGA HILLS TEA COMPANY LTD VS. INCOME TAX OFFICER [LAWS(CAL)-1989-6-18] [REFERRED TO]
COMMISSIONER OF INCOME TAX - II VS. MULTIPLEX TRADING & INDUSTRIAL CO. LTD. [LAWS(DLH)-2015-9-259] [REFERRED TO]
BBC WORLDWIDE LIMITED VS. ASST. DIRECTOR OF INCOME TAX, CIRCLE 1(1) [LAWS(DLH)-2016-3-132] [REFERRED TO]
ANIMISH PRADIP RAJE VS. SECURITIES AND EXCHANGE BOARD OF INDIA [LAWS(TLNG)-2021-8-75] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. ESS ESS KAY ENGINEERING CO PVT LTD [LAWS(P&H)-1981-6-4] [REFERRED TO]
KHARAR RICE MILLS VS. STATE OF PUNJAB [LAWS(P&H)-2023-7-48] [REFERRED TO]
ARJUN SINGH VS. ASSISTANT DIRECTOR OF INCOME TAX INVESTIGATION [LAWS(MPH)-1998-11-39] [REFERRED TO]
USHA BELTRON LIMITED VS. JOINT COMMISSIONER OF INCOME TAX [LAWS(PAT)-1999-8-103] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ANAND C L [LAWS(KER)-1989-9-46] [REFERRED TO]
VASANTIBAI N SHAH SMT VS. COMMISSIONER OF INCOME TAX [LAWS(BOM)-1994-11-69] [REFERRED TO]
JOINT COMMISSIONER OF INCOME TAX ASSESSMENT VS. GEORGE WILLIAMSON ASSAM LIMITED [LAWS(GAU)-2002-8-11] [REFERRED TO : (1979) 118 ITR 1 (SC)]
JANKI SOLVENT EXTRACTIONS LIMITED VS. DEPUTY DIRECTOR OF INCOME TAX [LAWS(ALL)-1995-11-53] [REFERRED TO]
C E S C LTD VS. Deputy Commissioner of Income Tax [LAWS(CAL)-2003-6-3] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NATHURAM GOKULKA [LAWS(CAL)-1981-11-25] [REFERRED TO]
SAROJ DEVI VS. WEALTH TAX OFFICER [LAWS(RAJ)-1984-2-32] [REFERRED TO]
ADESH UNIVERSITY VS. STATE OF PUNJAB [LAWS(P&H)-2014-5-281] [REFERRED TO]
TRIDENT LIMITED VS. UNION OF INDIA AND OTHERS [LAWS(P&H)-2013-4-490] [REFERRED]
COMMISSIONER OF WEALTH TAX VS. SHIVARAM SINGH [LAWS(PAT)-1984-11-29] [REFERRED TO]
LOKENDRA SINGH RATHORE VS. WEALTH TAX OFFICER [LAWS(MPH)-1983-12-14] [REFERRED TO]
HEMENDRA GOSWAMI VS. STATE OF CHHATTISGARH [LAWS(CHH)-2024-5-14] [REFERRED TO]
SUPER CHEMICALS VS. ADDITIONAL COMMISSIONER, GRADE I, TRADE TAX, AGRA ZONE, AGRA AND OTHERS [LAWS(ALL)-2010-1-287] [REFERRED TO]
MAHARAJA RANJIT SINGH GAEKWAD VS. UNION OF INDIA [LAWS(DLH)-2022-10-189] [REFERRED TO]
H A NANJI AND CO VS. INCOME TAX OFFICER A WARD [LAWS(CAL)-1979-6-27] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. DWARKA PROSAD BAZAZ [LAWS(CAL)-1986-12-16] [REFERRED TO]
S P AGARWALLA ALIAS SUKHDEO PRASAD AGARWALLA VS. INCOME TAX OFFICER E WARD [LAWS(CAL)-1980-7-1] [REFERRED TO]
PUNJAB PRODUCE AND TRADING CO LTD VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1982-6-39] [REFERRED TO]
G P AGARWAL VS. ASSISTANT COMMISSIONER OF INCOME-TAX [LAWS(ALL)-1994-3-91] [REFERRED TO]


JUDGEMENT

Bhagwati, J. - (1.)This appeal by certificate is directed against an order passed by a Division Bench of the High Court of Calcutta allowing an appeal against a decision of a single Judge dismissing the writ petition of the respondent. The facts giving rise to the appeal may be briefly stated as follows:
(2.)The respondent was assessed to income-tax for the assessment year 1959-60 and certain interest paid by the respondent to creditors from whom it claimed to have borrowed monies on hundis, was allowed as deductible expenditure. The assessment of the respondent was completed on 23rd Aug., 1960. On or about 25th January, 1968, however, a Notice was issued by the Income-tax Officer under Section 148 of the Income Tax Act, 1961 to re-open the assessment of the respondent for the assessment year 1959-60. The notice was obviously under Section 147 (a) since a period of four years had already elapsed from the close of the assessment year 1959-60 and no notice could be issued under Section 147 (b). The Income-tax Officer claimed that the transactions of loan represented by the hundis were bogus and no interest was paid by the respondent to any of the creditors shown in the hundis and it was wrongly allowed as a deduction and hence a part of the income of the respondent had escaped assessment by reason of the failure of the respondent to disclose fully and truly all material facts necessary for its assessment. The respondent challenged the validity of the notice issued by the Income-tax Officer by filing a writ petition in the Calcutta High Court. The respondent contended that there was no failure on its part to disclose fully and truly all material facts necessary for its assessment and that in any event the Income-tax Officer had no reason to believe that any part of the income of the respondent had escaped assessment by reason of such failure on the part of the respondent. The Income-tax Officer in the affidavit in reply filed by him on 5th December, 1968 declined to disclose the facts which had weighed with him in reaching the belief that the income of the respondent had escaped assessment by reason of its failure to disclose fully and truly all material facts, on the ground that if such facts were disclosed to the respondent, it would cause great prejudice to the interests of the Revenue and would frustrate the object of re-opening the assessment. This was obviously an untenable stand because the existence of reason to believe on the part of the Income-tax Officer was a justiciable issue and it was for the court to be satisfied whether in fact the Income-tax Officer had reason to believe that income had escaped assessment by reason of failure of the respondent to make a full and true disclosure. The Income-tax Officer realising this position filed a further affidavit on 27th January, 1970 stating as follows:
"In January 1968 I was the Income-tax Officer 'I' Ward, Hundi Circle, Calcutta. On or about the 25th January, 1968 I issued a notice under Section 148 of the Income Tax Act, 1961 on the petitioner. My reasons for issuing such notice were these. In the course of assessment of the petitioner for assessment year 1963-64 it was discovered that various items shown as loans against the security of hundis in the petitioner's books of account for the previous year relevant to assessment year 1959-60 were in fact fictitious. Credits against the names of certain persons as having advanced loans viz. Amarlal Moolchand, Girdharidas, Raghoomal, Murlidhar Kanhaiyalal and Deudaram Basdeo in the petitioner's books were found not to be genuine. It appeared during assessment proceedings for 1963-64 that none of such loans were genuine. In the premises, it appeared to me that the petitioner had failed to disclose fully and truly all material facts necessary for its assessment, and a portion of the petitioner's income had escaped assessment by reason of such failure."

(3.)The writ petition was heard by a single Judge of the High Court and he took the view that the affidavit of the Income-tax Officer dated 27th January, 1970 clearly showed that he had reason to believe that income of the respondent had escaped assessment by reason of its failure to disclose fully and truly all material facts and he accordingly dismissed the writ petition. The respondent preferred an appeal and a Division Bench of the High Court disagreeing with the view taken by the single Judge held that there was no failure on the part of the respondent to disclose fully and truly all material facts and in any event there was no material on the basis of which it could be said that the Income-tax Officer had reason to believe that any part of the income had escaped assessment by reason of such failure on the part of the respondent. The Division Bench accordingly allowed the writ petition and quashed and set aside the notice for re-opening the assessment. The Income-tax Officer thereupon preferred the present appeal to this Court after obtaining a certificate from the High Court.


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