# INOO-ADEN SALT MFG. & TRADING CO. PVT. LTD v. COMMISSIONER OF INCOME TAX, BOMBAY

- **Citation:** [1986] 1 S.C.R. 627
- **Court:** Supreme Court of India
- **Decided:** 1986-03-12
- **Bench:** SABYASACHI MUKllARJI, K.N. Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/inoo-aden-salt-mfg-trading-co-pvt-ltd-v-commissioner-of-income-tax-bombay-9293
- **Pages:** 6

## Headnote

627
Jurisdiction to reopen assessment by the Income Tax
Officer, when arises - Reopening assessment on the ground that
the assessee had obtained depreciation at 6 per cent on the
assets as masonry works, but the assets consisted of earth
work wholly or substantially - Whether escaped assessment
Duty of the assessee to disclose primary facts and truly -
Income Tax Act, 1961, section 147 (a).
A
B
c
A partnership firm business carried on by M/s. lndo Aden
D
·• Salt Works Co. was taken over by the appellant-assessee by an
agreement dated 24.8.1949. During the assessment year 1950-51,
the said Agreement as well as the Valuation Report of the
assets had been filed before the assessing authority. The
Income Tax Officer did not discuss the point whether the
assets were constructed of masonry or made of earth but on the
E
assessee's letter conveying its agreement that for the purpose
of depreciation the value should be taken as Rs.20,31,000 in
the aggregate, in the assessment order allowed 6 per cent
depreciation. Later it was found that 93% of the construction
works were made of earth and only 7% of masonry and that 59%
~ of piers were made of masonry and 41% of them were made of
F
earth were allowed 12% depreciation which rate is available
only if constructed entirely or mainly of wood. The Income Tax
Officer, on these facts proposed to reopen the assessment on
escaped income for the years 1955-56 to 1962-63. The jurisdiction of the Income Tax Officer to reopen the assessment under ·
section 147(a) of the Income Tax Act, 1961 and the High
G
Courts' 'declining to call for a statement of case on a
question of law by rejecting the application under section
--( 256(2) of the Act are under challenge in the appeals on certificate granted by the Bombay High Court.
Dismissing the appeal,s, the Cour~,
H
A
B
c
D
E
G
H
628
SUPREME COURT REPORTS
[1986] 1 S.C.R.
HEU>: l, l If there are some primary facts from which
reasonable belief could be formed that
there was some non- Y
disclosure or failure to disclose fully and truly all material
facts, the Income Tax Officer has jurisdiction to reopen the
assessment. Assessee itnows all the materl.al and relevant facts
- the assessing authority might not. In respect of the failure
to disclose, the omission to disclose may be deliberate or
inadvertent. That was immaterial. But if there is omission to
,
disclose
material
facts,
then,
subject
to
the
other
,,,.
conditions, jurisdiction to reopen is attracted. [632 D-F]
~
1.2 The obligation of the assessee is to disclose only
primary facts and not inferential facts. What facts are
material facts would depend upon the facts and circumstances
of each case. Further, whether there has been such non-disclosure of primary facts which has caused escapement of income in
the assessment was basically a question of fact.
In this case, what portion of the asset consisted of l
earth and what portion or proportion consisted of masonry work
was indubitably a material fact for the purpose of calculating
the depreciation. If over depreciation has been allowed on the
basis that the entire work consisted of masonry work, income
might have been under-assessed. The Income Tax Officer can
reasonably be said to have material to form that belief.
(631 E-F]
l, 3 Mere production of evidence before the Income Tax
Officer and leaving him to find out the position by further
probing is not enough. The assessee nust make full disclosure~
truly. There msy be omission or failure to make a true and
full disclosure, but if some material for the assessment lay
embedded in the evidence which the revenue could have uncovered but did not, then, it is the duty of the assessee to bring
it to the notice of the assessing authority. (632 D]
Calcutta Discount Co.
Ltd. v.
Incone Tax Officer
Companies District I, Calcutta & Another, 41 I;T,R, 191; Hazi
Aalr Mohd. Mir Ahmed v. Collllll.ssioner of Income-Tax, Amritsar, "-
110 I.T.R. 630; Income Tax Officer I Ward, Distt VI Calcutta &
Ors. v. Laldmani lfewal

## Text

INOO-ADEN SALT MFG. & TRADING
CO. PVT. LTD.
v.
COMMISSIONER OF INCOME TAX, BOMBAY
MARCH 12, 1986
[SABYASACHI MUKllARJI AND K.N. SINGH, JJ.]
627
Jurisdiction to reopen assessment by the Income Tax
Officer, when arises - Reopening assessment on the ground that
the assessee had obtained depreciation at 6 per cent on the
assets as masonry works, but the assets consisted of earth
work wholly or substantially - Whether escaped assessment
Duty of the assessee to disclose primary facts and truly -
Income Tax Act, 1961, section 147 (a).
A
B
c
A partnership firm business carried on by M/s. lndo Aden
D
·• Salt Works Co. was taken over by the appellant-assessee by an
agreement dated 24.8.1949. During the assessment year 1950-51,
the said Agreement as well as the Valuation Report of the
assets had been filed before the assessing authority. The
Income Tax Officer did not discuss the point whether the
assets were constructed of masonry or made of earth but on the
E
assessee's letter conveying its agreement that for the purpose
of depreciation the value should be taken as Rs.20,31,000 in
the aggregate, in the assessment order allowed 6 per cent
depreciation. Later it was found that 93% of the construction
works were made of earth and only 7% of masonry and that 59%
~ of piers were made of masonry and 41% of them were made of
F
earth were allowed 12% depreciation which rate is available
only if constructed entirely or mainly of wood. The Income Tax
Officer, on these facts proposed to reopen the assessment on
escaped income for the years 1955-56 to 1962-63. The jurisdiction of the Income Tax Officer to reopen the assessment under ·
section 147(a) of the Income Tax Act, 1961 and the High
G
Courts' 'declining to call for a statement of case on a
question of law by rejecting the application under section
--( 256(2) of the Act are under challenge in the appeals on certificate granted by the Bombay High Court.
Dismissing the appeal,s, the Cour~,
H
A
B
c
D
E
G
H
628
SUPREME COURT REPORTS
[1986] 1 S.C.R.
HEU>: l, l If there are some primary facts from which
reasonable belief could be formed that
there was some non- Y
disclosure or failure to disclose fully and truly all material
facts, the Income Tax Officer has jurisdiction to reopen the
assessment. Assessee itnows all the materl.al and relevant facts
- the assessing authority might not. In respect of the failure
to disclose, the omission to disclose may be deliberate or
inadvertent. That was immaterial. But if there is omission to
,
disclose
material
facts,
then,
subject
to
the
other
,,,.
conditions, jurisdiction to reopen is attracted. [632 D-F]
~
1.2 The obligation of the assessee is to disclose only
primary facts and not inferential facts. What facts are
material facts would depend upon the facts and circumstances
of each case. Further, whether there has been such non-disclosure of primary facts which has caused escapement of income in
the assessment was basically a question of fact.
In this case, what portion of the asset consisted of l
earth and what portion or proportion consisted of masonry work
was indubitably a material fact for the purpose of calculating
the depreciation. If over depreciation has been allowed on the
basis that the entire work consisted of masonry work, income
might have been under-assessed. The Income Tax Officer can
reasonably be said to have material to form that belief.
(631 E-F]
l, 3 Mere production of evidence before the Income Tax
Officer and leaving him to find out the position by further
probing is not enough. The assessee nust make full disclosure~
truly. There msy be omission or failure to make a true and
full disclosure, but if some material for the assessment lay
embedded in the evidence which the revenue could have uncovered but did not, then, it is the duty of the assessee to bring
it to the notice of the assessing authority. (632 D]
Calcutta Discount Co.
Ltd. v.
Incone Tax Officer
Companies District I, Calcutta & Another, 41 I;T,R, 191; Hazi
Aalr Mohd. Mir Ahmed v. Collllll.ssioner of Income-Tax, Amritsar, "-
110 I.T.R. 630; Income Tax Officer I Ward, Distt VI Calcutta &
Ors. v. Laldmani lfewal Das, 103 I. T. R. 437; and Malegaon Eleetricity Co. P. Ltd, v. Coumi.ssioner of Income Tax, Bombay, 78
I,T.R. 466 applied.
'·
INDO-ADEN SALT v. C.I.T, [MUKHARJI, J.]
629
CIVIL APPELLATE JURISDICTION
(NT)·of 1974.
Civil Appeal Nos. 800-807
From the Judgment and Order dated 21st June, 1973 of the
Bombay High Court in Income Tax Application No.6 of 1972.
P.G. Gokhale, B.R. Agarwal and V, Menon for the Appellant.
S.C. Manchanda, K.C. Dua and Ms. A. Subhashini for the
Respondent.
A
B
The Judgment of the Court was delivered by
C
SABYASACHI MUKHARJI, J. These appeals are by certificate
from the decision of the High Court of Bombay dated 21st June,
1973 whereby the High Court had declined the application made
under section 256 (2) of the Income Tax Act, 1961 (hereinafter
<: called 'the Act') wherein the assessee sought two questions to
D
be referred to the High Court. The questions were:
(1) Whether, on the facts and in the circumstances
of the case, the re-assessment proceedings under
section 147 (a) of the Income-tax Act, 1961, initiated by the Income-tax Officer for the assessment
E
years 1955-56 to 1962-63 against the assessee were
valid in law ?
(2) Whether, on the facts and in the circumstances
of the case, the Tribunal was justified in up-holding the action under section 147(a) of the Income
F
Tax Act, 1961 for the assessment years 1955-56 to
1962-63 ?
The real question, therefore, is whether there were
facts from which it could be believed that there was failure
or omission to disclose fully and truly all material facts
G
necessary for the assessment as a result of which income has
..,. escaped assessment. The assessment was sought to be re-opened
· for the years 1955-56 to 1962-63 (for failure to disclose
fully and truly all material facts). It is well-settled that
the obligation of the assessee is to disclose only primary
H
630
SUPREME COURT REPORTS
[1986] 1 s.c.R.
A
facts and not inferential facts - See Calcutta Discount Co. ·- .
Ltd. v. IncoJE Tax Officer Companies District I, Calcutta and ·
Another, 41 l.T.R. 191. There l!llst be, therefore, (a) full
disclosure, and (b) true disclosure of all material facts.
What facts are material for a particular case would depend
upon the facts and circumstances of each case, (c) there l!llst
B
be escapement of tax or under assessment due to such failure
or omission.
In this case the reason for the belief of the Income Tax
Officer was that the assessee had obtained depreciation at 6
per cent on the assets which were masonry works but the assets
...
C
really consisted of earth work wholly or substantially. If
that was the position then the assessee was not entitled to
depreciation as was granted. The question, is, whether the
assessee had disclosed the nature of the masonry work and
whether the nature of the asset had been fully and truly
disclosed.
D
E
F
G
H
The assessee's case was that a partnership business
carried on by M/s. Indo-Aden Salt Works Co. was taken over by
the asses see by an agreement dated 24th August, 1949 and
during the assessment year 1950-51 the said agreement dated
24th August, 1949 as well as the Valuation Report had been
filed before the assessing authority. It is, further, the case
of assessee that there was discussion on this Valuation
Report. It further appears from the assessment Order and the
affidavit that the Valuation Report was discussed and the
amount of depreciation was more or less agreed to between the
parties. The revenue's case, on the other hand, is that whichi
portion of the assets consisting of masonry work and which of
earth work was not discussed or disclosed. The assessee 's
contention before the revenue authorities was that the primary
facts were discussed fully and it was open to the revenue to
examine into this aspect greater and it was not possible after
the lapse of such a long ti'me to say actually whether what
portion of asset consisted of earth work has been disclosed or
not. It appears, however, from the order of the Tribunal that
by its last letter addressed to the Income Tax Officer the._.
assessee had conveyed its agreement that for the purpose o(
depreciation the value should be taken as Rs.20,31,000 in the
aggregate, in the assessment. The Tribunal has, further, found
that in granting the depreciation the I.T.O. did not discuss
•
INDO-ADEN SAL'.[' v. C. I. T. [MUKHARJI, J.]
631
the point whether the assets were constructed of masonry or
made of earth and the l.T.O. did not exclude for depreciation
the value of reservoirs, salt pans and piers and condensers
and channels made of earth but allowed the depreciation claim
of the assessee on the entire 11alue of the reservoirs, salt
pans and .piers and condensers and channels at 6% even though
these were only partly constructed of masonry and partly made
of
earth.
The
Tribunal
has
noticed
that
93%
of
the
construction works were made of earth and only 7% of masonry,
and the facts that 41% of the piers were made of earth and
only 59% of masonry was not challenged before the A.A.C. and
were not in dispute before the Tribunal. There is also no
dispute that depreciation at 6% is available only in respect
of such assets constructed of masonry and not if made of
earth. It was also not in dispute that depreciation on piers
is available at 12% only if constructed entirely or mainly of
wood. The fact that for the assessment years
1955-56 to
1962-63 excessive depreciation allowance had been allowed in
the original ·assessments and income chargeable to tax had
escaped assessment and/or was under-assessed for these years
was also not in dispute.
A
B
c
D
The only question, therefore, is, whether there was
failure on the part of the assessee to disclose fully and
truly all material facts necessary for assessment and future
whether such income escaped assessment . and whether such
E
escapement or under-assessment has been caused as a result of
the failure or omission on the part of the assessee to
disclose fully and truly all material facts. What facts are
i
material facts would depend upon the facts and circumstances
of a particulate case. This follows from the scheme of the
section and is well-settled by th.e authorities of this Court.
F
Ii: is the admitted position that the assessee had not
disclosed either by valuation report or ·by statement before
the l.T.O. as to what portion consisted of earth work and what
portion or proportion consisted of masonry work. For the
purpose of calculating depreciation that indubitably was a
G
~ material fact. If over depreciation has been allowed on that
basis i.e. that the entirety of the work consisted of masonry
work, income might ha11e been under-assessed. The Income tax
Officer can reasonably be said to have material to form that
belief. That position is also well-settled by the scheme of
H
A
B
c
632
SUPREME COURT REPORTS
[1986] 1 s.c.R.
the section, and concluded by the authorities of this Court.
ThA
~ssessee's contention is that the I.T.O. could have
found out the position by further probing. That, however, does
not exonerate the assessee to make full disclosure truly. The
explanation 2 to section 147 of the Act makes the position
abundantly clear. The principles have also been well-settled
and reiterated in numerous decisions of this Court. See Hazi
Amir Moh. Mir" Ahmed v. Counissioner of Income-tax, Amritsar,
110 I.T.R. 630 and Income-Tax Officer I Ward, Uistt. VI
Calcutta & Others v. Lakhmani Mewal Das, 103 I. T.R. 437,
Hidayatullah, J, as the learned Chief Justice then was,
observed in Calcutta Uiscount's case (supra) that mere production of evidence before the Income-tax Offlcer was not enough,
that there may be omission or failure to make a true and full
disclosure, if some material for the assessment lay embedded
in the evidence which the revenue could have uncovered but did
not, then, it is the duty of the assessee to bring it to the
D
notice of the assessing authority. Assessee knows all the
material and relevant facts - the assessing authority might
not. In respect of the failure to disclose, the omission to
disclose may te deliberate
or
inadvertent.
That
was
immaterial. l\nt if there is omission to disclose material
facts, then, subject to the other conditions, jurisdiction to
E
re-open is attracted. It is sufficient to refer to the decision of this Court in Calcutta Discount's case (supra) where
it had been held that if there are some primary facts from
which reasonable belief could be f orined that there was
some
non-disclosure or failure to disclose fully and truly all
material facts, the I.T.O. has jurisdiction to reopen the "1
F
assessment. This position was again reiterated by this Court
in Malegaon Electricity Co. P. Ltd. v. Conmissioner of Income--
Tax, Bombay, 78 I.T.R. 466.
Further more bearing these principles in mind in this
particular case whether there has been such non-disclosure of
G
primary facts which has caused escapement of income in the
assessment was basically a question of fact.
H
The High Court was right in declining to call for a
statement of case on a question of law. The appeals, therefore, fail. However> there will be no order as to costs.
S.R.
Appeals dismissed.