# INCOME TAX OFFICER, INCOME TAX-CUM-WEALTH TAX CIRCLE II, HYDERABAD v. NAWAB MIR BARKAT ALI KHAN BAHADUR

- **Citation:** [1975] 2 S.C.R. 464
- **Court:** Supreme Court of India
- **Decided:** 1974-10-16
- **Case number:** Civil Appeals Nos. 1179-1782 of 1970
- **Bench:** H. R. Khanna, A. C. Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/income-tax-officer-income-tax-cum-wealth-tax-circle-ii-hyderabad-v-nawab-mir-6325
- **Pages:** 6

## Headnote

Income taX Act, 1961, a. 141-Scope of-High Court's power of Interference
under Art. 226.
In 1950, the respondent had executed three trust deeds for the benefit of three
ladies who were described as his wives, and himself, as the father of their min1~r
children. After the returns in respect of the ass1:ssment year 1955-56, 1956-57, 1957·
58 and 1958-59. were filed by the respondent, the Income-tax Officer, who had the
three trust deeds before him called upon the respondent for information regarding
his relationship to those three ladies as well as his relationship to a fourth lady, A
statement was filed, on behalf of the respondent, before the Income-tax Offici:r,
wherein it was stated that only the fourtb lady was his legally wedded wife, that the
other three were merely referred to as the wives, and that their children wer1~ n1Jt
the legitimate children of the r~ondent. The Income-tax Officer, in assessing the
total income of the respondent did not include, under s. 16(3) of the 1922-Act,
the income of those three ladies and their minor children arising out of the trust
properties. In fact, he assessed them separately with respect to their income from
the trust prope1ties. In 1964 the Income-tax Officer issued notices under s. 148 of
the 1961-Act sedcing to re-open the assessments under s. 147 on the ground that there
were two other trust deeds of 1957, which were not produced before the I. T. O.
in which also two of the ladles were acknowledged as the wives of the respondent
and their children as his children and that their marriage should be presumed because
of the acknowl,edgement. The respondent there-upon challenged the validity of
the proceedings and the High Court allowed his petitioll.
Dismissing the appeal to this Court,
HELD : (I) Section 147(a) provides that if the Income-tax Officer has reasc1n
to believe that by reason of tho omission or failure on the part of the assessee to
disclose fully a11d truly all material facts necessary for his assessment for any yoa.r,
income chargeable to tax has escaped assessment for that year, he may assess llr
re-assess such income for the assessment year concerned. The fact that the ladies
A
B
c
D
E
and their children had been described in the 1957 -documents as wives and children
F
of the respondent would have been material if the description were anything new
that the Income-tax Officer happened to discover for the first time. But the 1950·
deeds also contained the same description. The non-production of the 1957-doci~-
ments at the time of the original assessment cannot therefore be regarded as nondisclosure of at)y material fact ner.essary for the assessment of the respondent for
the relevant assessment years. Having second thoughts on the same material does
not warrant the initiation of a proceeding under s, 147. [4670-H; 468B; D-E]
(2) The law has not changed or since the original assessments were made a11d
G
it was open to the Income-tax Officer to have made the presumption that the ladi11S
were the wives at the time when he made the 11sseS1ment. He cannot avail of s. 147
to correct his mistake. [468F·O)
(3) The expression 'reason to believp' oc:curring in s. 147 of the 1961-Act or
the corresponding s. 34 of the 1922-Act, does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reasons for tb,e belief must have a
rational connection or relevant bearing to the formation of the belief. Therefore,
H
the High Court, under Art. 226, has power to se~ aside a notice under s. 147 of the
1961 Act or s. :14 of the 1922-Act, if the condiuon precedent to the e:tercise of the
jurisdiction under those sections did not exist. [469C-D]
I.T.O. v. BARKAT ALI (Gupta, !.)
465

## Text

464
INCOME TAX OFFICER, INCOME TAX-CUM-WEALTH TAX
CIRCLE II, HYDERABAD
v.
NAWAB MIR BARKAT ALI KHAN BAHADUR
October 16, 1974
[H. R. KHANNA AND A. C. GUPTA, JJ.)
Income taX Act, 1961, a. 141-Scope of-High Court's power of Interference
under Art. 226.
In 1950, the respondent had executed three trust deeds for the benefit of three
ladies who were described as his wives, and himself, as the father of their min1~r
children. After the returns in respect of the ass1:ssment year 1955-56, 1956-57, 1957·
58 and 1958-59. were filed by the respondent, the Income-tax Officer, who had the
three trust deeds before him called upon the respondent for information regarding
his relationship to those three ladies as well as his relationship to a fourth lady, A
statement was filed, on behalf of the respondent, before the Income-tax Offici:r,
wherein it was stated that only the fourtb lady was his legally wedded wife, that the
other three were merely referred to as the wives, and that their children wer1~ n1Jt
the legitimate children of the r~ondent. The Income-tax Officer, in assessing the
total income of the respondent did not include, under s. 16(3) of the 1922-Act,
the income of those three ladies and their minor children arising out of the trust
properties. In fact, he assessed them separately with respect to their income from
the trust prope1ties. In 1964 the Income-tax Officer issued notices under s. 148 of
the 1961-Act sedcing to re-open the assessments under s. 147 on the ground that there
were two other trust deeds of 1957, which were not produced before the I. T. O.
in which also two of the ladles were acknowledged as the wives of the respondent
and their children as his children and that their marriage should be presumed because
of the acknowl,edgement. The respondent there-upon challenged the validity of
the proceedings and the High Court allowed his petitioll.
Dismissing the appeal to this Court,
HELD : (I) Section 147(a) provides that if the Income-tax Officer has reasc1n
to believe that by reason of tho omission or failure on the part of the assessee to
disclose fully a11d truly all material facts necessary for his assessment for any yoa.r,
income chargeable to tax has escaped assessment for that year, he may assess llr
re-assess such income for the assessment year concerned. The fact that the ladies
A
B
c
D
E
and their children had been described in the 1957 -documents as wives and children
F
of the respondent would have been material if the description were anything new
that the Income-tax Officer happened to discover for the first time. But the 1950·
deeds also contained the same description. The non-production of the 1957-doci~-
ments at the time of the original assessment cannot therefore be regarded as nondisclosure of at)y material fact ner.essary for the assessment of the respondent for
the relevant assessment years. Having second thoughts on the same material does
not warrant the initiation of a proceeding under s, 147. [4670-H; 468B; D-E]
(2) The law has not changed or since the original assessments were made a11d
G
it was open to the Income-tax Officer to have made the presumption that the ladi11S
were the wives at the time when he made the 11sseS1ment. He cannot avail of s. 147
to correct his mistake. [468F·O)
(3) The expression 'reason to believp' oc:curring in s. 147 of the 1961-Act or
the corresponding s. 34 of the 1922-Act, does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reasons for tb,e belief must have a
rational connection or relevant bearing to the formation of the belief. Therefore,
H
the High Court, under Art. 226, has power to se~ aside a notice under s. 147 of the
1961 Act or s. :14 of the 1922-Act, if the condiuon precedent to the e:tercise of the
jurisdiction under those sections did not exist. [469C-D]
I.T.O. v. BARKAT ALI (Gupta, !.)
465
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1179-1782
of 1970.
From the Judgment & Order dated the 7th March, 1969 of the
Andbra Pradesh High Court in Writ Petition Nos.1042-1045 of 1964. f,
S. C. Manchanda, B. B. Ahuja and R. N. Sachthey, for the Appel·
lam (In all the Appeals).
B
S. V. Gupte, Anwarulla Pasha, J. B. Dadachanji, A. Subba Rao and
0
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G
H
Anjali K. Varma, for the Respondents (In all the Appeals).
M. N. Phadke, A. V. Rangam, Gopal Nair and A. Subhashini, for
the Interveners (In all the Appeals).
The Judgment of the Court was delivered by
GUPTA, J. These are four appeals by certificate from a common
Judgment of the High Court of Andhra Pradesh at Hyderabad by which
the High Cour.t directed the appellant, Income Tax Officer, Income
Tax-cum-Wealth Tax Circle II, Hyderabad to refrain from proceeding
against the respondent under sec. 147 (a) of the Income Tax Act, 1961.
The appellant had served on the respondent, Nawab Sahib Mir Osman
Alikhan Bahadur, H. E. H., the Nizam of Hyderabad, notices under
sec. 148 of the Income Tax Act, 1961 stating thaf he had reasons to
believe that income of the respondent chargeable to tax for the assessment years 1955-56, 1956-57, 1957-58 and 1958-59 had escaped assessment within the meaning of sec. 147 of the Act and proposing to reassess the income forthesaidassessmentyears. The respondent challeng.
ed the validity of the proceedings under sec. 147 sought to be initiated
by filing four writ petitions in the High Court ·Of Andhra Pradesh at
Hyderabad. The High Court by the impugned Judgment allowed all
the four petitions and prevented the Income Tax Officer from proceeding further under sec. 147 of the Income Tax Act, l96L In these
appeals the appellant questions the correctness of the High Court's
decision.
The material facts are briefly these. Assessments for the aforesaid
four years were completed respectively on March 18, 1958, March 19,
1958, July 20, 1958 and March 28, 1961 under the Income Tax Act of
1922. After the returns in respect of the said years were filed, the
Income Tax Officer called upon the respondent to state his relationship
with four ladies by putting three queries . to him. The queries were
as follows:
"(a) The rites and ceremonies attendant on legal marriages.
according to Muslim law and how they were observed in the case
of each of the four ladies viz., Dulhan Pasha Begum Saheba,
Mazbarunnisa Begumsaheba, Laila Begum Saheba and Jani
Begum Saheba.
(b) What legal status is accorded to the children of Mazha.
runnisa Begum Saheb, Laila Begum Sabeba and Jani Begum
Saheba, vis-a-vis, the children of the late Dulhan Pasha Begum
Saheba?
466
SUPREME COURT REPORTS
[1975] 2 S.C.R·
(c) Ap.y other factors from the point of view of the religicn
which distinguished the status oflate Dulhan Pasha Begum Saheba
from the other three ladies."
It appears that on May 1, 1950, August 6, 1950 and December 29
1950 the respondent had executed three trust deeds, described respective:
ly as Family Trust, Miscellaneous Trust nand Family Pocket Money
trust, for the benefit of Mazharunnissa Begum, Laila Begum, Jani
Begum and the minor children of the last two. In the aforesaid trust
deeds the three ladies were described as wives of the respondentwhowa.s
also referred to as the father of their minor children. In one of these
documents, viz., the family Pocket Money Trust Deed, the description
of Laila. Begu,m and Jani Begum as wives was preceded by the expression "ladles of position". Under sec. 16 (3) of the Income Tax
Act of 1922, in computing the total income of any individual for the
purposes of assessment, the income of the wife or minor child of the
assessee arising from assets transferred by the husband to the wife or
the minor child otherwise than for adequate consideration was to be
included. There is no dispute that these trust deeds were before the
Income Tax Officer before he completed the assessments for the said
four years.
On September 9, 1957 Shri C. B. Taraporewala, Financial Adviser.
and General Power of Attorney Agent of the respondent, filed a statement before the Income Tax Officer in reply to these queries. In this
reply it was stated that the late Dulhan Pasha Begum Saheba was the:
only legally wedded wife of the respondent, that with the other three:
ladies the respondent had not gone through the essential formalities of'
a valid marriage under Mohammedan Law, that these three !adieu
who occupied high social position and who were received in his palace
were "ladies of position" and in view of th~ special favours bestowed
upon them they were referred to as wives in the said three trust deeds
thbugh in the strict legal sense the description· was incorrect and the
children of these ladies were not the legitimate children of the respon ..
dent and had no legal status as such. This explanation apparent,ly
satisfied the Income Tax Officer because in assessing the total income
of the respondent for the said four years he did not inclhde the income of these thre:: ladies and their minor children arising out of the
trust properties. It is also admitted that the beneficiaries of the trusts
were separately assessed on the income derived from the trusts along
with their individual income.
On March 13, 1964 the notices under sec. 148 of the Inccme Tax
Act, !961 were issued seeking to reopen the assessments under sec. 147
of the Act. i\!fter some correspondence with the Income Tax Officer,
the authorised representatives of the respondent, M/s. S. G. Dastgir
and Company, Chartered Accountants, filed supplemental returns for
the aforesaid four years "without prejudice" to the respondent's right
to question the validity of the notices. The supplemental returns merely
affirmed the original returns filed by the respondent.
I
By his letter dated April 15, 1964 addressed to M/s. Dastgir and
Company, the Income Tax Officer stated the reasons for reopening the
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I.T.O. v. BARKAT ALI (Gupta, 1.)
467
assessments und~r sec. 147(a). Referring to two subsequent trusts
named Fern Hill and Race View created by the respondent on March
21, 1957 and December 5, 1957 respectively, it was stated that the
ma~erial facts relating to these two documents were not brought to the
notice of the Department in the course of the original assessment proceedings. Fern Hill Trust was created for the benfit of the children
of Laila Begum
and Race View Trust for the benefit of
Jani Begum and her son Imdad Jah Bahadur. In the Fern Hill
Trust Deed Laila Begum was described as wife of the respondent and
her children. as the children of the respondent by her. Similarly in
the Race View Trust Deed Jani Begum was described as wife of the
respondent and Imdad Jah Bahadur as his son by her. According
to the Income Tax Officer the facts that Laila Begum and Jani Begum
were described as wives and their children as the children of the respondent in the Trust Deeds executed in 1957 indicated that "certain
material facts relevant for the assessment years were not disclosed to
the Department, that the statement given by the Financial Adviser is
untrue and that thereby income chargeable to tax has been under-.
assessed". In his letter the Income Tax Officer also referred to sec. 268
of Mulla's Principles of Mohammedan Law which enumerates the
circumstances from which marriage will be presumed in the absence
. of direct proof and stated that the respondent having acknowledged
the three ladies as his wives and thier children as his children in the
Trust Deeds executed in 1950 and 1957 all the circumstances mentioned in sec. 268 were present. The letter concluded by saying that
it was established that the ladies and their children were the legal
· wives and legitimate children of the respondent.
·
·
The common counter-affidavit affirmed by the Income Tax Officer in
an,wer to the writ Ntitions was on similar lines to the aforesaid latter.
Admittedly Fern Hi!l and Race View Trust Deeds executed in 1957
were not produced before the Income Tax Officer when he made
the original assessments for the four years in question. In the counteraffidavit it was alleged that these two Trust Deeds were "material
and primary facts necessary for completing the assessments of the
petitioner-assessee f?r the relevant assessment yea.rs" and it was s.ub.-
mitted that if the said two documents had been disclosed at the time
of the original ·assessments, the Income Tax Officer "would have cer·
tait1ly arrived at the conclusion" that he came to in his letter dated
April 15, 1964.
Clause (a) of Sec. 147 of the Income Tax Act, 1961 un~er which the
assessments were sought to be reopened, so far as it is relevant for the
present purpose, provides that if .the Income Tax Officer h?.s reason to
believe that, by reason of the omission or failure on the part of an
assessee to disclose fully and truly all material facts necessary for his
a5sessment for any year, income chargeable to tax has escaped assessment for that year, he may assess or reassess such income for the assessment year concerned. The High Court held that the reasons assigned for reopening the assessments did not fall within the soope of omission or failure on the part of the assessee to disclose fully and truly all
material facts, that all the material facts were before the Department
15-255 Sup,Cl/75
468
SUPREME COURT REPORTS
[1975] 2 s.c.R.
when it made the assessments in question and the trusts created in
1957 did not "throw a different light on the matters already disclosed".
The question is whether the existence of the two trust deeds ex- .
ecuted by the respondent in 1957 was a material fact necessary for his
assessment for the relevant assessment years. The fact that the thr13e
ladies and their children have been described in these two documents
as wives and children of the respondent would have been material if
the description were anything new that the Income Tax Officer happem:d
to discover for the first time. The thJee trust deeds of 1950 also contained the same description of these ladies and their children and the
Income Tax Officur accepted the statement made by respondent's Financial Adviser Shri G. B. Taraporewala seeking to explain why the ladies
had been described as wives therein. It is true that the trust deeds of
1957 were not produced at the time of the original assessment b1~t
we do not see what difference production of these two additional documents could have made which contain the same description ofthe
ladies. Neither the letter addressed to the respondent's authorisi:d
representatives, M/s. S. G. Dastgir and! Company, by the Income Tax
Officer on April 15, 1964 nor the counter-affidavit filed in the Hi1:h
Court explains this point. The documents of 1957 cortform to those
of 1950 io material particulars; the trust deeds of 1957 op.ly repeat what
the deeds of 1950 had disclosed. -Non-production of the documents
executed in 1957 at the time of the original assessments cannot therefore be regarded as non-disclosure of any material fact necessary for the
assessment of the respondent for the relevant assessment years.
The High Court was right in holding that the Income Tax
Officer Ii.ad no valid reasons to believe that the respondent
had omitted or failed to disclose fully and truly all material
facts and consequently
had rio jurisdiction to
reopen the
assessments for the four years in question: Having second thoughts
on the same material does not warrant the intiation of a proceeding
under sec. 147 of the Income Tax Act, 1961.
Mr. Manchanda, learned counsel for the appellant, took us through
several sections of Mulla's Principles of Mohammedan Law including
sec. 268 and submitted that in the circumstances of the case it must
be presumed that the three ladies were the legally wedded wives of
the respondent. The law has not changed since the original assessments were made and it was open to the Incomt Tax Officer to make
that presumption at the time. If he should have but did not do so
then, he cannot avail of sec. 147 to correct that mistake. In any
event, we are not called upon in this proceeding to record a finding on
the question whether in fact the ladies were .respondent's legally wedded wives. We are concerned only with the question whether the condition precedent to the exercise of jurisdiction under sec. 147 exists
in this case; we have found that it does not.
Mr. Manchanda also contended that the High Court exercising
jurisdiction under Art. 226 of the Constitution had no power to investigate whether on the material before him the Income~ Tax Offici'r
was justified' in proceeding under sec. 147 of the Income Tax Ac:t
1961. He relied, among others, on the~ following decisions in support
A
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A
B
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D
J.T.O. v. BARKAT ALI (Gupta, J.)
469
of his contention: S. Narayanappa and others vs. Commissioner of
Income Tax, Bangalore, (') Kantamani Venkata Narayana and Sons
vs. First Additional Income Tax Officer, Rajahmundry, (2)
Commiss·
ioner of Income Tax, Gujarat vs. A. Raman & Co. (l) and of course,
Calcutta Discount Co. Ltd. vs. Income tax Officer, Companies District
I. Calcutta, (4)
We do not think that these decisions help him. In this case, the
decision of the High Court is not thaf the material before the Income
Tax Officer was ·insufficient or that he had failed to draw the correct
conclusion from the material before him but that no fresh material had
come to light just:fying reopening of the assessments. The authorities
to which Mr. Manchanda referred point out that the expression "reason
to believe" occurring in sec. 147 of the Income Tax Act, 1961 or the
corresponding sec. 34 of the Act of 1922 does not mean a purely subjective satisfaction on the part of the Income Tax Officer, the reasons
for the belief must have a rational connection or a relevant bearing to the
formation of the belief, and tl\at the High Court under Art. 226 of the
Constitution has power to set aside a notice under sec. 147 of the
Act of 1961 or sec. 34 of the Act of 1922 if the condition precedent to
the exercise of jurisdiction under these sections does not exist.
In the result, these appeals fail and are tiismissed with costs. One
. hearing fee.
An application for intervention in these appeals made by three
persons claiming to be sons of the respondent was not ultimately pres·
sed; no order is therefore called for on this application.
V.P.S.
(1) 63 I.T.R. 219.
(2) 63 I.T.R. 638.
(3) 67 I.T.R. 11.
(4) 41 I.T.R. 191.
Appeals dismissed.