# MADHYA PRADESH INDUSTRIES LTD v. THE INCOME-TAX OFFICER, NAGPUR

- **Citation:** [1971] 1 S.C.R. 266
- **Court:** Supreme Court of India
- **Decided:** 1970-04-16
- **Case number:** Civil Appeals Nos. 2419 to 2421 and 2423 to 2425 of 1966
- **Bench:** J. C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/madhya-pradesh-industries-ltd-v-the-income-tax-officer-nagpur-5012
- **Pages:** 9

## Headnote

Indian Income-tax Act (11 of !922) s. 34(1) (a)--Circumstances for
initiating proceedings under s. 341 !) (a)-lf open to challenge in a Court
of/aw.
A
B
· The assessee paid commission to A, one of its selling agents,
and
claimed that amount as a revenue outgoing in the computation of
it&
C
profits for that year.
The Income-tax Officer made the order of assessment
without expressly
referring to
the
said
deduction but
proceeding on the basis that it was a permissible deducti.on.
Later, the
Income-tax Officer issued' notices
under s. 34(1) (a) of the Income-ta)'
Act, 1922 stating that he had "reason to. believe that" the .. income of the
assessee had escaped assessment
and
was
under-assessed.
He sent a
questionnaire to the assessee. Since 'the assessee, did not reply to the
questionnaire, the income-tax officer informed the assessee, that he presumD
ed that no correspondence with A existed that no ser1 ice was
rendered
by A and the payments made were without justification. The assessee filed
petitions under Arts. 226 and 227 of the Constitution for restraining the
Jl'ICome-tax Officer from taking any action on the notices. The assessee's
case was that it had placed all the material facts before the Income-tax
officer that the Income-tax Officer had examined those facts before making
the assessments, and that the Income-tax officer had added back the comE
mission paid to another selling agent to the profits of the assessee. but
took no objction to the commission paid to A.
The High Court dismissed
the petition. A!lowing the assessee's appeal, this Court :
HELD: Th~ proceedings taken under s. 34(1) (a) must be quashed.
Two conditions must be •atisfied in order to confer iurisdiction on
the
Income-tax Officer to issue the notice unaer s. 34 of the Act in respect
of assessments beyond the period of four years, but within a period of
F
eight years, from the end of the relevant year, viz. (i) the Income-tax
Officer must have reason to believe that income, profits or gains chargeable to income-tax had. been under-assessed, and (ii) he mu§t have reason
to believe that such "under-assessment" had occurred by reason of either
(a) omission or failure on the part of the assessee to make a return of
his income under s. 22 or (b) omission or failure on the part of the
as~essee to disclose fully and truly all the material facts necessary for hi•
assessment for that year.
Both these conditions ate conditions precedent
G
to be satisfied before the Income-tax Officer acquires jurisdiction to issue
:a notice under the section.
If there are in fact some reasoiiable grounds
for the Income-ta< Officer to believe
that there had
been any
nondisclosure as regards any fact, which could have a material bearing on the
question of under-assessment, that. would be sufficient to give jurisd1c.tion
to the Income-tax Officer to issue the notice under s. 34. Whether ti1ese
grounds are adequate or not is not a r.natter for the Court to investigat~.
fa other words, the sufficiency of the grounds which induced tlw Incomeff
tax Officer to act is not a justiciable issue. It is of course open for the
assessee to contend that the Income-tax Officer did
not hold the
belief
· that there had been such non-disclosure. In other words. th~ existence of
A
B
c
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H
M.P. INDUSTRIES v. I.T.O., NAGP.UR (Hegde, J.)
267
the belief can be challenged by the assessee but not the sufficiency of the
1e010ns for the belief.
The
expression.,
"reason to believe" in s.
34
do .. not mean purely subjective satisfaction on the part of the Jncomctax Officer. The belief must be held in good faith; it cannot be me['Iy
a pretence.
lt is oPen to the court 10 ,examine whether the reasons tor
~ belief have a. rational connect.ion or a relevant bearing to the for1nation of the belief and are not extraneous or irrelevant to the purpose of
I.be section. To this limited extent, the action of the Income-tax Officer
in starting proceedings under s. 34 of the Act is open. to challenge in a
court of Jaw.

## Text

266
MADHYA PRADESH INDUSTRIES LTD.
v.
THE INCOME-TAX OFFICER, NAGPUR
April 16, 1970
[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Indian Income-tax Act (11 of !922) s. 34(1) (a)--Circumstances for
initiating proceedings under s. 341 !) (a)-lf open to challenge in a Court
of/aw.
A
B
· The assessee paid commission to A, one of its selling agents,
and
claimed that amount as a revenue outgoing in the computation of
it&
C
profits for that year.
The Income-tax Officer made the order of assessment
without expressly
referring to
the
said
deduction but
proceeding on the basis that it was a permissible deducti.on.
Later, the
Income-tax Officer issued' notices
under s. 34(1) (a) of the Income-ta)'
Act, 1922 stating that he had "reason to. believe that" the .. income of the
assessee had escaped assessment
and
was
under-assessed.
He sent a
questionnaire to the assessee. Since 'the assessee, did not reply to the
questionnaire, the income-tax officer informed the assessee, that he presumD
ed that no correspondence with A existed that no ser1 ice was
rendered
by A and the payments made were without justification. The assessee filed
petitions under Arts. 226 and 227 of the Constitution for restraining the
Jl'ICome-tax Officer from taking any action on the notices. The assessee's
case was that it had placed all the material facts before the Income-tax
officer that the Income-tax Officer had examined those facts before making
the assessments, and that the Income-tax officer had added back the comE
mission paid to another selling agent to the profits of the assessee. but
took no objction to the commission paid to A.
The High Court dismissed
the petition. A!lowing the assessee's appeal, this Court :
HELD: Th~ proceedings taken under s. 34(1) (a) must be quashed.
Two conditions must be •atisfied in order to confer iurisdiction on
the
Income-tax Officer to issue the notice unaer s. 34 of the Act in respect
of assessments beyond the period of four years, but within a period of
F
eight years, from the end of the relevant year, viz. (i) the Income-tax
Officer must have reason to believe that income, profits or gains chargeable to income-tax had. been under-assessed, and (ii) he mu§t have reason
to believe that such "under-assessment" had occurred by reason of either
(a) omission or failure on the part of the assessee to make a return of
his income under s. 22 or (b) omission or failure on the part of the
as~essee to disclose fully and truly all the material facts necessary for hi•
assessment for that year.
Both these conditions ate conditions precedent
G
to be satisfied before the Income-tax Officer acquires jurisdiction to issue
:a notice under the section.
If there are in fact some reasoiiable grounds
for the Income-ta< Officer to believe
that there had
been any
nondisclosure as regards any fact, which could have a material bearing on the
question of under-assessment, that. would be sufficient to give jurisd1c.tion
to the Income-tax Officer to issue the notice under s. 34. Whether ti1ese
grounds are adequate or not is not a r.natter for the Court to investigat~.
fa other words, the sufficiency of the grounds which induced tlw Incomeff
tax Officer to act is not a justiciable issue. It is of course open for the
assessee to contend that the Income-tax Officer did
not hold the
belief
· that there had been such non-disclosure. In other words. th~ existence of
A
B
c
D
E
G
H
M.P. INDUSTRIES v. I.T.O., NAGP.UR (Hegde, J.)
267
the belief can be challenged by the assessee but not the sufficiency of the
1e010ns for the belief.
The
expression.,
"reason to believe" in s.
34
do .. not mean purely subjective satisfaction on the part of the Jncomctax Officer. The belief must be held in good faith; it cannot be me['Iy
a pretence.
lt is oPen to the court 10 ,examine whether the reasons tor
~ belief have a. rational connect.ion or a relevant bearing to the for1nation of the belief and are not extraneous or irrelevant to the purpose of
I.be section. To this limited extent, the action of the Income-tax Officer
in starting proceedings under s. 34 of the Act is open. to challenge in a
court of Jaw. [273 E-H; 274 A-CJ
Calcutta Discoune Company Ltd. Y. Jnco1netax Officer Co1np(l11ies Di;)'/,
l and another; [1961] 2 S.C.R. 241; S. Narayant1ppa and Ors. v.
Co111111isslo11er of Income-tax Bangalore, 63 I.T.R. 219; Kantamani
Ve11kata
Narayana and Sons v. First Addi. Incom!-ta.t Officer, Rajahmundry; 63
I.T.R. 638, followed,
In the present case, the assessee in its writ-petitions had repudiated
tile assertion of the Income-tax Officer that he had reason to believ< that
due to the omissio~ or failure on the part of the company to give material
facts, some income had escaped assessment.
Under those circumstanc,,.
the officer who issued the notices under s. 34(1)(a) was expected to file
hn affidavit setting out the circumstances
under which he
formed the
necessary belief. That officer had not filed any affidavit in these pro·
ceeding~ The proceedings recorded by him before issuing the notices had .
not been produced nor his repon to the Commissioner and1 even tho Com·
missioner's sanction had not been produced. Hence it was not possible
to hold that the Income-tax Officer had any reason to form the belief in
question or the reaions before him were relevant for the purpose. [274 D·F]
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2419 to
2421 and 2423 to 2425 of 1966.
Appe,als by special leave from the judgment and order dated
February 22, 1966 of the Bombay High Court. Nagpur Bench in
Special Civil Applications Nos. 140 to 142 of 1962.
A, K. Sen, G. L. Sanghi, Rameshwar Nath, for the appellant
(in all the appeals).
·
S. C. Manchanda, S. K.. Aiyar Ml.d R. N. Sachthev. for the
rospondent (in all the appeals).
The Judgment of the Court was delivered by
Hegde, J.
In these appeals by special leave, the only question of law that arises for decision is whether the respondent was
oompetent to initiate proceedings under s·.
34 of the Indian
Income Tax Act, J 922 (which, will hereinafter be referred to as the
Act).
The respondent initiated proceedings under s. 34 of the Act
aga~nst the appellant by issuing notices under that section on
De~ember 26. 1960 in respect of the assessment years 1953-54,
t 954-55 and 1955-56. The appellant challenged the validity of
268
SUPREME COURT REP.ORTS
[1971] l S.C.R.
those proceedings by means of a writ petitions under An. 226 and
227 of the Constitution in the High Court of Judicature at Bombay (Nagpur Bench).
Those petitions were summarily dismissed.
The appellant thereafter .appealed to this Court after obtaining special leave from this Court.
This . Court allowed those
appeals on April 8, 1965 holding that the High Court was not
jusWied fo summarily dismissing the writ petitions as the allegations made therein merited examination.
Thereafter the High
Court issued rule nisi in those petitions. The respondent opposed
those petitions.
After hearing the parties, the High Court again
dismissed those writ petitions.
Hence these appeals.
The facts of the case material for deciding these appeals have
been set out in detail in this Court's order dated April 8,
1965.
We shall briefly refer to them.
The above appeals relate to proceedings under s. 34 of the
Act in respect of three assessment periods.
It would be sufficient
if we set out the facts relating to the assessment year 1953-54.
There is no dispute· that if the proceedings relating to that year
are held to be invalid, similar would be the position regarding the
proceedings relating to the other two assessment periods.
On the
other hand, if they are held to be valid, the same would be true
in respect of the other assessment periods.
The appellant, Madhya Pradesh Industries Ltd.
(hereinafter
referred to as the company), is engaged in the business of mining
·manganese ore.
On March 18, 1952, the company appointed
M/s. J. K. Alloys Ltd. (hereinafter called 'Alloys') as its sellin~
agents.
In the account year relating to
the
assessment year
1953-54, the company.paid as commission, Rs. 1,13,052/8/9 to
the selling agents and claimed that amount as a revenue outgoing
in the computation of its profits for that year.
The Income-tax
Officer made the order of assessment without expressly referring
to the said deduction but proceeding on the basis that it is a permissible deduction.
On December 26, 1960, the income-tax
Officer issued a notice to the company in exercise of his powers
under s. 34 of the Act reciting therein that he having "reason to
believe that" the income of the company assessable to income-tax
for the assessment year 1953-54 had (a) escaped assessment and
(b) under-assessed, he proposes to reassess the income that had
escaped assess111ent or had been under-assessed.
He called upon
the company to deliver a. return of the total income of the company assessable for .the said assessment year 1953-54. In
r~
ponse ·to a Jetter sent by the company, the Income-tax Officer
informed the company that the notice issued by him was under
s. 34(1)(a). Thereafter there was some correspondence between the Iricome-tax Officer and the company.
The Income-tax
A
B
c
D
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G
H
A
B
c
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M.P. INDUSTRIES v. I.T.O., NAGPUR (Hegde, J.) .
269
Officer required the. company to give him the information called
for in the questionnaire issued by him.
The company did not
send any reply to the said questionnaire.
On December 21,
1961, the Income-tax Officer informed the company that since the
questions asked were not replied to, he presumed that no correspondence with Alloys existed and the payment of commission had
been made without any justification, Alloys having· rendered no
service as selling agents.
On April 2, 1962, the company moved the High Court of
Judicature of Bombay (Nagpur Bench) praying for the issue of a
writ of certiorari under Art. 226 of the Constitution or an appropriate direction or order under Art. 227 of the Constitution calling
for the record of the case and for the issue of writs in the nature
of Prohibition• or Mandamus restraining the Income-tax Officer
from taking_ any action or proceeding in enforcement or implementation of the notice dated December 26, 1960. The petition,
as mentioned earlier, was rejected in limini.
In the writ petition, the plea taken by the company was that
in issuing the 1110tice under s. 34(1 )(a) of the Act, the Income-tax
Officer acted without jurisdiction and for a colourable purpose.
Its case as set out in the writ petition is as follows :
In its return the company disclosed for the year ending March
31, 1953 Rs. 15,70,587/- as its total profits according to its books
of account.
In the statement under s. 38(3) of the Act filed with
the return, the company disclosed t11at it had paid Rs.
1,13,052/8/9 as "ccmmision sales" "on
different dates" by
cheques to Alloys and Rs. 6,091/4/- to J. S. Williams on October 4, 1952 by cheque as commission on sales.
In the profit and
loss account of the company filed with the return, the amount of
Rs. 29,76,067 /10/8 was disclosed as received by "sales less commission".
On December 7, 1953, R. K. Gupta, a Director of the
company made a statement before the Income-tax Officer stating
that the commission was paid to Williams on the sales accounted
for during the year ended March 31, 1953 and that the same
should be allowed as deduction. and that "similar was the case
with the commission payable to J. K. Alloys Ltd., which had
already been paid subsequently." On February 21,
1954, the
Income-tax Officer called upon the company to produce amongst
other documents, certificates showing whether any receipt included in the income, profits or gains had been credited or transferred
to an:r assets, capital account. or any other liability account, a
similar certificate regarding any credit for important expenses
claimed under the head ''profit and loss A/ c", a list of buyers with
full addresses along with quantity, number and net proceeds of
export business as well as Indian sales, a statement setting out
full details of various items of indirect expenses debited to profit
270
SUPREME COURT REPORTS
! 197 l] 1 S.C.R.
and loss account and a statement of expenses grouped and sorted
out under the heads, wages. salary and other emoluments.
On
June 21, 1954, the company filed the certificates and the statements demanded together with the statement showing that out of
the sale proceei.ls, commission paid to Alloys and J. S. Williams
was deducted.
In the course of the assessment proceedings,
R. S. Agarwal, a representative of the company appeared before
the Income-tax Officer and agreed that the commission "debited
as paid to Williams may be added back" and about Alloys he saili
that the commission "had already been paid".
Thereafter on
February 14, 1955, the assessment of the company was completed by the Income-tax Officer.
The Income-tax Officer rejected the commission said to have been paid to Williams and added
back that amount to the gross profits of the company.
He took
no objection to the commission paid to the Alloys:
The case pleaded by the company in the writ petition is that it
had placed before the Income-tax Officer all the material facts;
the Income-tax Officer before making the assessment had examined those facts and was satisfied with the explanation given by the
company. The company denied that the Income-tax Officer had
any reason to believe that by reason of the omission or failure 011
the part of the company to disclose folly ·and truly a4 material
facts necessary for his assessment for the year in question income,
profits or gains chargeable to income-tax have escaped assessment
for that year or have been under-assessed. The company disputed that the Income-tax Officer had any reason before him to
have the required belief.
It also denied the fact that it had
omitted or failed to disclose fully and truly all material facts
necessary for the assessment in question or that any income, profits, or gains chargeable to income-tax have escaped assessment in
that year.
Section 34 (1) of the Act as at the relevant time read :
"If-
( a) the Income-tax Officer has reason to believe
that by Mason 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 for that year, or have been
under-assessed, or assessed at too low a rate, or
have been made the~ subject of excessive relief
under the Act, or excessive loss or depreciation
allowance has been computed, or
( b) notwithstanding that there has been no omission
or failure as mentioned in clause (a) on the part
A
B
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A
B
c
D
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G
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M.P. INDUSTRIES V. I.T.O., NAGPUR (Hegde, J.)
271
of the assessee, the Incmne-tax Officer has in
consequence of information in his possession
reason to believe that income, profits or gains
chargeable to income-tax have been
underassessed or assessed at too low a rate, or have
been made the subject of excessive relief under
this Act, or that excessive loss or depreciation
allowance has been computed.
he may in cases falling under clause (a) at any time
within eight years and in cases falling under clause (b)
at any time within four years of t ~ end of that year,
serve on the assessee, or, if the assessee is a comp.any,
on the principal officer. thereof, a notice containing all
or any of the requirements which may be included in a
notice under sub-section ( 2) of section 22 and may
proceed to assess or re-assess such income, profits or
gains or recompute the loss or depreciation allowance;.
and the provisions of this Act shall, so far as may be,
apply accordingly as if the notice were a notice issued
under that sub-section :
Provided that-
( i) the Income-tax Officer shall not issue a notice
under this sub-section, unless he has recorded
hi> reasons for doing so and the Commissioner
is satisfied on such reasons recorded that it is a
fit case for the issue of such notice;
(ii) the tax shall be chargeable at the rate at which
it would have been charged had the income,
profits or gains not escaped assessment or full
assessment, as the case may be; and
(iii) where the assesment made or to be made is an
assessment made or to be made on a person
deemed to be the agent of a non- resident person
under section 43, this sub-section shall have
effect as if fer the periods of eight years and four
years a period of one year was substituted.
Explanation.-Production before the ·Income-tax
Officer of account-books or other evidence from which
w.aterial facts could with due diligence have been discovered by the Income-tax Officer will not necessarily
amount to disclosure within
the
meaning of this
section."
272
SUPREME COURT REPORTS
[l 971) l S.C.R.
In Calcutta Discount Company Ltd. v. Income-Tax Officer
Companies Dist. I and another(!), this Court ruled that before
an Income-tax Officer could issue a notice under s. 34 ( 1 ){a) of
the Act, two conditions must co-exist, namely, that he must have
reason to believe ( 1) that income, profits or gains had been
under-assessed and (2) that such under-assessment was due to
non-disclosure of material facts by the assessee. It was observed
therein that where, however, the Income-tax Officer has prima
facie reasonable grouds for believing that there has been a non-
. disclosure of a primary material fact, that by itself gives him the
jurisdiction to issue a notice under s. 34 of the Act and the adequacy or otherwise of the grounds of such belief is not open to
investigation by the court.
It is for the assessee who wants to
challenge such jurisrnction to establish that the Income-tax Officer
had no material for such belief.
Speaking for the majority
Das Gupta J. observed therein :
"To confer jurisdiction under this section to issue
notice in respect of assessments beyond the period of
four years, but within a period of eight years,
from the end of the relevant year two conditions have therefore to be satisfied.
The first is that the
income-tax Officer must have reason to believe that
income, profits or gains chargeable to income-tax have
been under-assessed.
The second is that he must have
aJ,o reason to believe that such "under-assessment" has
occurred by reason of either (i) omission or failure on
the part of an assessee to make a return of his income
under s. 22, or (ii) omission or failure on the part of
an assessee to disclose fully and truly all material facts
necessary for his assessment for that year.
Both these
conditions are conditions precedent to be satisfied before
the Income-tax Officer could have jurisdiction to issue .
a notice for the assessment or re-assessment beyond the
period of four years but within the period of eight years,
from the end of the year in question."
Proceeding further the learned judge observed :
A
B
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"The position therefore is that if there were in fact
G
some reasonable grounds for thinking that there had
been any non-disclosure as regards any primary fact, ·
which could have a material bearing on the question of
'under-assessment' that would be sufficient to give
jurisdiction to the Income-tax Officer to issue the notices
under s. 34.
Whether these grounds were adequate or
not for arriving at the conclusion that there was a nonH
disclosure of material facts would not be ()pen for the
(I) (1961] 2 $.C.R. 241
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M.P. INDUSTRIES v. I.T.O., NAGPUR· (Heg.:Je, l.)
273
court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-·
tax Officer had when he assumed jurisdiction some
prima facie. grounds for thinking that there had been
some non-disclosure of material facts".
Shah J. (one of us) in his dissenting judgment has o?served
that the expression "has reason to believe" in s. 34(1) (a) of ~e
Indian Income Tax Act does not mean a purely subjective satis- ·
faction of the Income-tax Officer but predicates the existence of
reasons on which such belief has to be founded.
That belief,
therefore cannot be founded on mete suspicion and must be based
on evidence and any question as to the adequacy of such evidence
is who!Iy immaterial at that stage. He
furth~r observed that
where the existence of reasonable belief that there had been
under assessment due to non-disclosure by the assessee, which is a
condition precedent to exercise of the power under s. 34(l)(a)
is asserted by the assessing authority and the record prima facie
supports its existence, any enquiry as to whether
th~ !authority
could reasonably hold the belief that the under-assessment was
due to non-disclosure by the assessee of material facts. necess>1ry
for the assessment must, be barred.
In S. Narayanappa .and ol\I'. v. Commissioner of Income Tax,
Bangalore('), this Court held that two conditions must be satisfied
in order to confer jurisdiction on the Income-tax Officer to issue
the notice under s. 34 of the Act in respect of assessments beyond
the period of four years, but within a period of eight years, from
the end of the relevant year, viz. (i) the Income-tax Officer must
have reason to believe that income, profits or gair.s chargeable to
income-tax had. been under-assessed and (ii) be inust have reason
to believe that such "under-assessment" had occurred by telison
of either (a) omission or failure on the part of the assessee to
make a return of his income under s. 22 or (b) omission or
failure on the part of the assessee to disclose fully and truly all
the material facts necessary for his assessment for that year. Both
these conditions are conditions precedent to Qe satisfied before the
Income-tax Officer acquires jurisdiction to issue a notice under
the section.
If there are in fact some reasonable grounds for the
Income-tax Oflicer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing
on the question of under-assessment, that would be sufficient to
give jurisdiction to the Income-tax Officer to issue the notice
under s. 34. Whether these grounds are rulequate or not is iiot
a matter for the Court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to
Act is not a justiciable issue. It is of course open for the assessee
(I) 63, I.T.E., 2:9
274
SUPREME COURT REPORTS
(1971] I S.C.ll.
10 contend that the Income-tax Officer did not hold the
belief
that there had been such non-disclosure.
In other words,
the
existence of the belief can be challenged by the assessee but not
,ulficiency of the reasons for the belief.
Therein it was observed
that the expression "'reason to believe'" in s. 34 does not mean
purely subjective satisfaction on the
part of the Income-tax
Officer.
The belief must be held in good faith : it cannot be
onerely a p!'etence.
ft is open to the court to examine whether
1he reasons for the belief have a rational connection or a relevant
bearing to the formation of the belief and are not extraneous or
irrelevant to the purpose of the section.
To this limited extent,
1he action of the· Income-tax Officer in starting proceedings under
' s. 34 of the Act is open to challenge in a court of law.
The same view was again expressed by this Court in Ka11tamani Venkata Narayana and Sons v. First Additional Income-Tax
Officer, Rajahmundry(').
ln these cases, the company in its writ petitions had repudiated
:he assertion of the Income-tax Officer that he had reason to
believe that due to the omission or failure on the part of the company to give material facts, some income had escaped assessment.
Under those circumstances one would have expected the office:
who issued the notices under s. 34 (1 )(a) to file
an affidavit
setting out the circumstances under which he formed the necessary
belief.
We were told that one Mr. Pandey had issued the notices
in questiqp.
That officer had not filed any affidavit in these pro-
~eedings. The proceedings recorded by him before issuing th0
;10tices have not been produced nor his r,eport to the Commissioner or even the Commissioner's sanction has not been produced.
Hence it is not possible to hold that the Income-tax Officer had
any reason to form the belief in question or the reasons before
him were relevant for the purpose.
We have no basis before us
to hold tbat the Income-tax Officer had jurisdiction to issue the
impugned notices.
Hence the proceedings taken by him have to
be quashed .
. For the reasons mentioned above, we allow these appeals, s~t
. aside the order of the High Court and quash the proceedings taken
under s. 34( 1 )(a) of the Act.
The respondent shall pay the
costs of these appeals-hearing fee one set.
'Y.P.
Appeal allowed.
(1) 63, I.T.R. 638.
A
B
c
D
E
II
G
"