# COMMISSIONER OF INCOME-TAX, WEsr CALCUTTA & ANR. BENGAL v. HEMCHANDRA KAR & ORS

- **Citation:** [1971] 1 S.C.R. 283
- **Court:** Supreme Court of India
- **Decided:** 1970-04-16
- **Bench:** J.C. Shah, K. S. Hegde, Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-wesr-calcutta-anr-bengal-v-hemchandra-kar-ors-5017
- **Pages:** 5

## Headnote

Indian lncomt•tax Acr (11 of 1922), s. 34 and Indian
Income-tax
Amendment Act, 1953, s. '31-Scope of.
The anessee was a Hindu undivided family.
The Income-tax Ofllcer
determined the total Income. of the assessee at a certain figure.
Foliowlna
demonetization of blah denomination notes the anmee encashed notes
of the value of Rs. f9,000 and each of five members of the family en·
cashed certain notes, the total encaslied by all the five
members belna
Rs. 1,10,000.
The Income-tax Officer reopened the assessments
under
s. 34 of the Income-tax Act, 1922 (as amended in 1948 and made applicable by reason of s. 31 of the Income-tax Amendment Act, 1953)
and
completed the reassessment on January 31, 1955. He included Rs. 19,000
in the total income of the family and the amounts which had been sepa·
ratelv encashed by the five members were included in the reassessments
of their respectiYe individual incomes.
On February 2, 1955, he issued
another notice under s. 34 and after hearing the assessee, included the
•um of Rs. 1,10,000 in the total income of the family.
On the question whether the second notice was competent.
HELD : Under s. 34, as it stood at the relevant time, what the Incometax Officer has to see is if by reason of omission or failure on the part
of the assessee to disclose fully and truly •all material facts l\CCessary
for his assessment there had
been escapement of income. From 'the
primary facts disclosed by the assessee or discovered by the authoritl',
the authority has to draw inferences as regards other facts and ultimately
draw the proper legal inferences. In the present case, the primary facts
were within the knowledge of the Income-tax Officer at the time when he
completed the first reassessment. When he was in possession of all facts
and proceeded to make the reassessment by including the. amount in the
individual accounts of the members of the family, the escapement h"'
occurred by reason of· the failure of the officer to include the total sum
in the assessment of the family,
He could
not therefore, a few
day~
later, merely changed his opinion
and issue the second notice
under
s. 34 to the family. [286 F-H; 287 A-CJ
Majority opinion in Calcutta Co. Ltd. v. lnccme-tax Of!icer, Companies
Pistl'ict l Calcutta & Anr, 41 1,T.R. 191. followed.
C1v1L APPELLATE JUR1soicti6N : Civil Appeal No 2273 o{
1%6.
.
Appeal from the judgment and order dated February 12, 1964
of the Calcutta High Court in Income-tax Reference No. 84 of
1960.
.
S. C. Manchanda, R N. Sachthey and B. D. Sharma, for the
appellants.
284
SUPREME COURT REPORTS
fl971] I S.C.R.
A. K. Sen and D. N. Mukherjee, for the respondent No. 2.

## Text

A
B
c
D
E
F
G
H
283
COMMISSIONER
OF INCOME-TAX, WEsr
CALCUTTA & ANR.
BENGAL
v.
HEMCHANDRA KAR & ORS.
April 16, 1970
[J.C. SHAH, K. S. HEGDE AND A. N, GROVER, JJ.]
Indian lncomt•tax Acr (11 of 1922), s. 34 and Indian
Income-tax
Amendment Act, 1953, s. '31-Scope of.
The anessee was a Hindu undivided family.
The Income-tax Ofllcer
determined the total Income. of the assessee at a certain figure.
Foliowlna
demonetization of blah denomination notes the anmee encashed notes
of the value of Rs. f9,000 and each of five members of the family en·
cashed certain notes, the total encaslied by all the five
members belna
Rs. 1,10,000.
The Income-tax Officer reopened the assessments
under
s. 34 of the Income-tax Act, 1922 (as amended in 1948 and made applicable by reason of s. 31 of the Income-tax Amendment Act, 1953)
and
completed the reassessment on January 31, 1955. He included Rs. 19,000
in the total income of the family and the amounts which had been sepa·
ratelv encashed by the five members were included in the reassessments
of their respectiYe individual incomes.
On February 2, 1955, he issued
another notice under s. 34 and after hearing the assessee, included the
•um of Rs. 1,10,000 in the total income of the family.
On the question whether the second notice was competent.
HELD : Under s. 34, as it stood at the relevant time, what the Incometax Officer has to see is if by reason of omission or failure on the part
of the assessee to disclose fully and truly •all material facts l\CCessary
for his assessment there had
been escapement of income. From 'the
primary facts disclosed by the assessee or discovered by the authoritl',
the authority has to draw inferences as regards other facts and ultimately
draw the proper legal inferences. In the present case, the primary facts
were within the knowledge of the Income-tax Officer at the time when he
completed the first reassessment. When he was in possession of all facts
and proceeded to make the reassessment by including the. amount in the
individual accounts of the members of the family, the escapement h"'
occurred by reason of· the failure of the officer to include the total sum
in the assessment of the family,
He could
not therefore, a few
day~
later, merely changed his opinion
and issue the second notice
under
s. 34 to the family. [286 F-H; 287 A-CJ
Majority opinion in Calcutta Co. Ltd. v. lnccme-tax Of!icer, Companies
Pistl'ict l Calcutta & Anr, 41 1,T.R. 191. followed.
C1v1L APPELLATE JUR1soicti6N : Civil Appeal No 2273 o{
1%6.
.
Appeal from the judgment and order dated February 12, 1964
of the Calcutta High Court in Income-tax Reference No. 84 of
1960.
.
S. C. Manchanda, R N. Sachthey and B. D. Sharma, for the
appellants.
284
SUPREME COURT REPORTS
fl971] I S.C.R.
A. K. Sen and D. N. Mukherjee, for the respondent No. 2.
The Judgment of the Court was delivered by
Grover, J.-This is an appeal by certificate from a judgment of
the Calcutta High Court i<n an Income ta" Ref~rence.
The assessee during the material time was a Hindu Undivided
Family consisting of the six memb.:rs.
In the original assessment
for the assessment year 1946-4 7 the year of account being from
April 14, 1945 to April 13, 1946, the Income tax Officer determmed the total income of the assessee at Rs. 35,741
accruing
from the business and other sources such as sale proceeds of forest
produce, fisheries etc.
Following demQnetization of High Denomination Notes in January 1946 the assessee encashed such notes
of the value of Rs. 19,000. The five membP·~ of the family named
below also encashed notes of the value shown against each of them,
the total value of the notes so encashed being Rs. 1,10,000:
1.
Hen1 Chandra Kar
2. Jatindra Nath !<."
3. Atul Chandra Kar
4. Narendra Nath J<,ar
5.
Bishnt.ram ¥.ar
Rs. 26,000/-
. Rs. 24,000/-
Rs. 23,000/-
Rs. 21,000/-
Rs. 16,0CO/-
The Income tax Officer reopened the assessments of the H:1ndu
Undivided Family and of the five members for the assessment year
J 946•47. He included Rs. 19,000 in the total income of the
family and the amounts which had been separately encashed by
the five members were included in the reassessments of their res·-
pective individual income.
This reasses~ment was completed on
January 31, 1955. Two days later i.e. February 2,
1955 the
Income tax Officer issued another notice under s. 34 of the Income
tax Act 1922 to the family seeking to include in the income of
the family the amount of the High Denomination notes of the total
value of Rs. 1,10,000 which had been encashed separately by the
five members. On behalf of the assessee it was explained that
each of the five members was in receipt of the pocket allowance
varying from Rs. 100 to Rs. 150 per month an.d also received cash
and jewellery as gifts from his relations; therefore the ·amounts
encashed by such members .belonged to 'them individually.
The
.Income tax Officer was not satisfied with the explanation. He )ncluded the sum of Rs. l, 10,000 in the total income of the family.
The Appellate Assistant Commissioner, on appeal, held that the
second notice under s. 34 issued to the family on February 2, 1955
was incompetent.
He annulled the reassessment made pursuatit
A
B
c
D
E
F
G
H
C.I.T., w. BENGAL v. H.· KAR (Grover; J.)
285
A
thereto. The Appellate Tribunal, however, held on appeal by the
department that tile notice issued under s. · 34 was valid. The
Tribunal called for a re1>9rt from the Appellate Assistant Commissioner on meritf."' In his repQrt the Assistant Commi~ioner agreed
with the view of the Income tax Officer. The Tribunal was finally
satisfied that the amounts of the High Denomination notes which
B
had been encashed in the name of the five members individually
belonged to the Hindu Undivided Family. The following questions
of law were referred by the Tribunal for the decision of the Highl
Court:
·
c
D
E
F
G
H
(I ) "Whether, on the facts and in the circumstances
of the case, the assessment made upon the assessee Hindu Unidivided family pursuant to a
notice under section 34 of the Indian Iiricome tax
Act issued on the 2nd February, 1955 was in
accordance with law.
( 2) Whether on the facts and in the circumstances
of the case, the sum of Rs. l, l 0,000 was rightly
included in the assessment of the Hindu Undivided family".
The High Court held that the seccf!l.4 notice issued under s. 34
cf the Act on February 2, 1955 could not have been issued by
the Income tax Officer to the Hindu Undivided Family. It was
found that wli.en the first reassessment was made the primary facts
necessary .for reassessment of the family were in the possession of
the Income tax Officer. These facts came into possession not by
virtue of disclosure made by the family but were discovered by him
ctherwise. At the time of the first reopening of the assessment of
!he Hindu Undivided Family and of the individual members the
question of assessment of the entire amount represented by the
High. Denomination Notes was under direct consideration. It was
cpen to the Income tax Officer to assess the whole amoll(llt of
Rs. 19,000 and Rs. 1,10,000 in the hands of the Hindu Undivided Family at that stage. The escapement, i{ any, therefore took
place by reason of the failure of the Income tax Officer to assess
the family with respect to the sum of Rs. l, I0,000 when he was in
fu]] possession of al! th!-~· material facts. The answer to the first
question was given by the High Court in the negative. On the
second question it was considered that the answer would be merely
academic but in spite of this the High Court proceeded to express
its agreement with the finding of the Tribunal on the 1>9int.
Section 34 of the Act has been amended from time· to time.
In the present case this section, as amended in 1948, would be
applicable by reason of s. 31 of the Income tax Alm!ndment Act
1953. We are concerned withs. 34(l)(a). If t!le present case
286
SUPREME COURT REPORTS
[l 971 J l S.C.R.
could be brought under that provision the second notice which was
issued in February 1955 would not be barred by time. But if action
. could not be taken under it there could be no manner of doubt that
the notices which were issued and the reassessment which was
. made would be beyond the period prescribed. Section 34 ( 1) (a)
is in the following tenns :
"Income escaping assessment.-(!) I.f-
( a) the Income tax Officer bas reason to believe that
by reason of the omission or failure on the part
of an assessee to make a return of his income
under section 22 for any year or to disclose fully
and truly all material facts necessary for his assessment for that year, income, profits or gains
chargeable to income-tax have escaped assessment f<fr that year, or have been um!er-assessed,
or assessed at too low a rate, or have been made
the subject of excessive relief under the Act, or
excessive Joss or depreciation allowance has been
computed or"
What has to be seen is whether the Income tax Officer could have
reason to believe that by reason of omission or failure on the
part of the assessee to disclose fully and truly all material facts
necessary for his assessment there had been esc'apement of income ? The High Court rightly relied on the observations in the
majority judgment in Calcutta Discoun,t Co. Ltd. v. Income tttx
Officer, Companles District I Calcutta & Another(') that in every
assessment proceeding the assessing ·authority will, for the purpose
of computing or determining the proper tax, require to know all
· the facts which help him in coming to the correct conclusion.
· From the primary facts in his possession whether Ot!l. disclosure by
· the assessee or discovered by him on the basis of facts disclosed
or otherwise the assessing authority has to draw in.ferences as regards certain other facts and ultimately from the primary facts and
· the further facts inferred from them the authority has to draw
the proper legal inferences. Therefore, the duty of disclosing all
·the primary facts lies on the assessee.
The primary facts were
admittedly within the knowledge of the Income tax Officer at the
time when he completed the first reassessmaiit under s. 34. This
is clear from the order of the Appellate Assistant Comm :ssioner to
whom the Income tax Officer reported that in the course of
reassessment under s. 34 in respect of individual members it became apparent that "they ,acted as merely name lenders of the
Hindu Undivided Family and that the total sum of Rs. 1,10,000
encashed by them actually belonged to the Hindu Undivided
(I) 41 T T.R. 191.
A
B
c
D
F.
G
H
B
c
'
c.1.t., w. BENGAL v. H. KAil ((;rover, J.)
287
Family". When the Income tax Officer was in possession of all
these facts and he proceeded to make the reassessment of the individual members by including the amounts in question in their
individual accounts he could mot a few days later merely change
his opinion and issue the notices under s. 34 to the Hindu Undivided Family. In this situation it could hardly be said that the
requirements of s., 34 ( 1) (a) were satisfied.
The escapement
had taken place by reason of the failure of the Income tax Officer
to include the sum of Rs. l, 10,000 in the assessment of the Hindu
Undivided Family when he was in full possession of an the neces·
sary and material facts. We have no doubt that the High Court
returned the correct answer to the first question. Evidently the
second question need not be answered as it becomes purely academic when answer to the first question is in favour of the assessee.
The appeal fails and it is dismissed with cost~.
V.P.S.
Appeal dismissed.