AZIM PREMJI TRUSTEE COMPANY PVT LTD V. PRINCIPAL COMMISSIONER OF INCOME TAX-2

WP/8059/2021

AI Insights

The case involves the Azim Premji Trustee Company Pvt. Ltd., which challenged the notice issued by the Income Tax Department for reopening its assessment for the Assessment Year 2013-14. The notice was based on the grounds that income had escaped assessment due to non-disclosure of material facts. The petitioner argued that all relevant facts were disclosed during the original assessment, and the reopening was beyond the statutory period. The court examined the legal provisions under Section 147 of the Income-tax Act, 1961, and relevant case law to determine the validity of the notice.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 767611 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 21-04-2022
• Assessment Year: misc
• Other Referred Cases: Calcutta Discount Company Limited vs. Income Tax Officer, Mohini Bai M. Sarda vs. First Income Tax Officer, Thanthi Trust vs. ITO, Murlidhar Bhagwandas and Co. vs. CIT, Technocraft Industries vs. G.S. Tung, 2nd ITO, S.Narayanappa vs. Commissioner of Income Tax, Assistant Commissioner of Income Tax vs. ICICI, New Delhi Television Ltd. vs. Deputy Commissioner
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S GANESH
• Keywords: Assessment Reopening; Income Tax; Jurisdiction; Limitation Period; Material facts
• Section: 147; 148; 143(3); 56(2)(vii)(c); 226

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 21st DAY OF APRIL 2022 BEFORE THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR WRIT PETITION No.8059/2021 (T-IT) BETWEEN: AZIM PREMJI TRUSTEE COMPANY PVT. LTD., #134, DODDAKANNELLI, SARJAPUR ROAD NEXT TO WIPRO CORPORATE OFFICE BANGALORE-560 035 REPRESENTED HEREIN BY ITS DIRECTOR MR.AZIM HASHAM PREMJI …PETITIONER (BY SRI S.GANESH, SENIOR ADVOCATE FOR SRI. SANDEEP HUILGOL, ADVOCATE) AND: 1. PRINCIPAL COMMISSIONER OF INCOME-TAX-2, BANGALORE BMTC BUILDING, 80 FEET ROAD 6TH BLOCK, NEAR KHB GAMES VILLAGE KORAMANGALA, BENGALURU-560 095 2. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 4(1)(1), BANGALORE BMTC BUILDING, 80 FEET ROAD 6TH BLOCK, NEAR KHB GAMES VILLAGE KORAMANGALA, BENGALURU-560 095 3. CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA NORTH BLOCK, NEW DELHI-110 002 REPRESENTED HEREIN BY ITS CHAIRPERSON …RESPONDENTS (BY SRI.K.V.ARAVIND, ADVOCATE) 2 THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED NOTICE DATED 31.03.2021 ISSUED BY THE R2 U/S 148 OF THE INCOME-TAX ACT, 1961 ANNEXURE-A AND QUASH THE IMPUGNED CIRCULAR DATED 03.08.2012 ISSUED BY THE R3 ANNEXURE-B AND QUASH THE IMPUGNED CIRCULAR DATED 31.12.2018 ISSUED BY THE R3 ANNEXURE-C AND ETC. THIS W.P. IS BEING HEARD AND RESERVED ON 18.12.2021, COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER In this petition, petitioner has sought for the following reliefs:- “ (i) Quashing the impugned notice dated 31.03.2021 bearing No.ITBA/AST/S/148/2020-21/ 1032116338 (1) issued by the 2nd Respondent under Section 148 of the Income-tax Act, 1961 (Annexure ‘A’). (ii) Quashing the impugned Circular dated 03.08.2012 bearing No.6/2012 (F.No.133/44/2012- SO (TPL)} issued by the 3rd Respondent (Annexure - ‘B’) (iii) Quashing the impugned Circular dated 31.12.2018 bearing No.10/2018 [F.No.173/626/2018-ITA.I] issued by the 3rd Respondent (Annexure - ‘C’) (iv) Declaring that the impugned proceedings initiated by the 2nd Respondent under Sections 147 and 148 of the Income-tax Act, 1961, are wholly without jurisdiction, barred by limitation and, therefore, without the authority of law; 3 (v) Declaring that Section 56(2)(vii)(c) of the Income-tax Act, 1961, has no application to the gift of shares of Wipro Ltd. Received by the Petitioner in the previous year relevant to the Assessment year 2013-14, and (vi) Pass such other or further orders as this Hon’ble Court may deem fit in the facts and circumstances of the case, and in the interests of justice and equity”. 2. Briefly stated, the various contentions urged by the petitioner are as under:- (i) The petitioner is a private limited company and is the sole Trustee of a private discretionary Trust called “Azim Premji Trust” (for short ‘the APT’). As per the trust deed of APT, there are three settler partnership firms and three settlor companies. The settlor firms, the settler companies, the petitioner and the beneficiary companies are all part of the promoter group of Wipro Ltd., of which, Mr.Azim Hasham Premji is the promoter. As a part of an inter se transfer within the promoter group, the APT received certain securities being listed shares of Wipro Ltd., from the settlor firms in financial year 2012-13 and the settlor companies in financial year 2010-11 as a gift to be 4 held as the corpus of APT and these transactions were duly disclosed contemporaneously to the stock exchanges and this information was also disseminated to the public at large. It is contended that the aforesaid gifts were duly disclosed in the audited financial statements of APT for the respective financial years. (ii) It is contended that thereafter, pursuant to a thorough examination and verification of all the material placed on record by the petitioner which clearly constituted the true and full disclosure on its part of all the material information sought and required for the purpose of its assessment under the Act, an assessment order came to be passed in the case of the petitioner under Section 143(3) of the Income Tax Act, 1961 (for short ‘the I.T.Act’) for Assessment Year 2013-14, in which the returned income was accepted. (iii) It is further contended that thereafter, i.e., on 31.03.2021, which is well beyond the stipulated period of four years from the end of Assessment Year 2013-14, the 2nd respondent issued the impugned notice under Section 148 of the I.T.Act after obtaining the sanction of respondent 5 No.1 stating that there were reasons to believe that APT’s income chargeable to tax for the said Assessment Year had escaped assessment and proposing to re-assess its income. In response, the petitioner requested for the reasons for reopening APT’s assessment. Acceding to its request, the 2nd respondent furnished the purported reasons for re-opening the assessment for Assessment Year 2013-14. (iv) Petitioner has contended that the impugned notice is based on a patent error of law because it equates a private limited company with an individual and on that erroneous basis, records the reason to believe that the provisions of Section 56(2)(vii)(c) of the I.T.Act are applicable to the petitioner in respect of the gift of Wipro Ltd.’s shares received by it. Consequently, the so-called “reason to believe” that its income has escaped assessment is completely baseless and non-est. It is further contended that in the recorded reasons, extensive reliance has been placed upon the two impugned Board Circulars of 2012 and 2018 despite them being directly 6 contrary to the provisions of Sections 2(31) and 56(2)(vii)(c) of the I.T.Act. (v) It is contended that in any event, there is no failure or omission whatsoever on the part of the petitioner to disclose any material facts necessary for its assessment for Assessment Year 2013-14. The impugned Section 148 Notice is therefore patently time barred and without jurisdiction; the statutorily required sanction under section 151 has been granted by the 1st respondent without any application of mind and without any consideration of the materials on record relating to the Petitioner’s assessment for assessment year 2013-14. (vi) Alternatively, it is contended that Section 56(2) (vii) (c) of the I.T. Act provided that where an individual or Hindu Undivided Family receives any movable property in any year during the period 01.10.2009 to 01.04.2017 with a fair market value of more than Rs.50,000/- for a consideration which is less than the fair market value , the same shall be treated as the income of the recipient. The proviso to Section 56(2)(vii)(c) of the I.T.Act provides that this clause shall not apply to any property received from any relative as 7 defined or on the occasion of the marriage of the individual. The term “relative” is defined in Explanation (e) to Section 56(2)(vii) in terms (of brother, sister, spouse etc.) which make it absolutely clear that individual means only a natural person and not a corporate entity. (vii) During the year ending 31.03.2013, the petitioner received gift of Rs.29.55 crore number of WIPRO shares from 3 Premji Group firms. This gift was fully disclosed in the petitioner’s Balance Sheet for the financial year 2012- 13, where the number of WIPRO shares received as gift, their face value and the market value of the shares at the date of the Balance Sheet were all disclosed. Indeed, there are no other details or particulars which could possibly be disclosed regarding the said WIPRO shares received as gifts. (viii) It is contended that during the regular assessment proceedings for A.Y 2013-14, the Assessing Officer (A.O) issued a notice under Section 142(1) asking, inter alia, for the complete list of donors, with address, PAN and amount donated. The Petitioner’s reply gave complete particulars of the donors, their PAN numbers and the 8 number of WIPRO shares received as gifts and also the relevant demat statements. It is contended that an assessee is under a duty or obligation to disclose only the basic and primary facts relating to his assessment and thereafter, it is for the Assessing officer to make further enquires and draw inferences and if he does not do so for any reason, then the revenue cannot contend that there was any failure or omission on the part of the assessee. (ix) It is contended that despite being in possession of all the relevant facts relating to the gifts of shares received by the petitioner and the Trust Deed of Azim Premji Trust, the Assessing officer chose not to apply Section 56(2)(vii)(c) of the I.T.Act; instead, after the expiry of the period mentioned in the proviso to Section 147, the Assessing officer has taken a new view, which is not permissible under the proviso to Section 147 of the I.T. Act. (x) It is further contended that the Assessing officer passed the assessment order under Section 143(3) on 31.03.2016 recording that the petitioner’s authorized representatives had attended from time to time in connection with the assessment proceedings and had 9 submitted the required details which were taken on record. The assessment was completed by accepting the income returned by the petitioner. It is contended that in a case of reopening covered by the proviso to Section 147, the reasons recorded must set out the exact particulars of the failure to disclose on the part of the assessee, on account of which the escapement of income has taken place and a ritual repetition of the proviso to Section 147 would not be sufficient. In the present case, the reasons recorded only state that though the number of WIPRO shares received as a gift were disclosed but neither the book value nor the market value of the shares was disclosed in the Balance Sheet. This is factually incorrect because the face value of the WIPRO shares (Rs.2/- per share) and also their market value as on 31.03.2013 are clearly disclosed. (xi) In any event, share of WIPRO is widely quoted and frequently traded and its market value from minute to minute is readily available. The petitioner cannot possibly be accused of failing to disclose information which is in the public domain and is continuously available to everybody. In any event, the reasons recorded do not even attempt to 10 claim that the non-application of Section 56(2)(vii)(c) of the I.T.Act and the consequent alleged escapement of income was because the Assessing officer was allegedly unaware of the market price of WIPRO shares. For application of Section 56(2)(vii)(c) of the I.T.Act, even if a price as nominal as one paise is assigned to be the market value of each Wipro share received as a gift with the number of shares received as a gift being Rs.29.55 crores, the aggregate value would exceed the limit of Rs.50,000/- specified in Section 56(2)(vii)(c) of the I.T.Act. Thus, in the facts of the case, it is axiomatic that the Assessing officer considered Section 56(2)(vii)(c) of the I.T.Act not to be attracted at all rather than being unaware of the market price of WIPRO shares as alleged. The market price of these shares is irrelevant because in the reasons recorded, nowhere it is specifically allege and establish that the alleged escapement of income was by reason of the so- called non-disclosure of the share price. In any event, such an allegation, even if made, would be false because the Balance Sheet states the market value. It is contended that the jurisdictional condition precedent laid down under the 11 proviso to Section 147 of the I.T.Act i.e., failure to disclose the material fact, which failure allegedly is the proximate cause of the escapement of income has not been fulfilled at all in the present case and the impugned Section 148 Notice requires to be struck down on that ground alone and by itself. (xii) Petitioner has also contended that the other jurisdictional condition precedent for re-opening i.e., escapement of income also does not exist in the present case. The contentions urged by the respondents that the income has escaped assessment because Section 56(2)(vii)(c) of the I.T. Act was wrongly not applied to the gifts of WIPRO shares received by the petitioner as can be seen from Annexure-M dated 09.04.2021 viz., the reasons recorded that the petitioner-limited company is an individual to whom Section 56(2)(vii)(c) of the I.T.Act applies is untenable and devoid of merit. It is therefore contended that on this distinct and independent ground also, the impugned Section 148 Notice requires to be struck down by this Hon’ble Court. 12 3. The respondents - Revenue have filed the statement of objections interalia contending that the petition is premature, since the petitioner – assessee is required to file return of income to the impugned assessment notice under Section 148 of the I.T.Act and seek reasons for reopening and file objections before the assessing officer, who is required to pass an order on the same and only upon the assessing officer passing such an order, the petitioner would be entitled to challenge the same in accordance with law. It is contended that since the petitioner has approached this Court without filing objections or the assessing officer passing orders, the present petition is not maintainable. 3.1 The respondents have further contended that the challenge to the impugned circulars dated 03.08.2012 and 31.12.2018 are also misconceived and devoid of merits and the same are liable to be rejected. It is contended that the challenge to the applicability of Section 56 (2) (vii) (c) of the I.T.Act is also not sustainable in view of the equally efficacious and alternative remedy available to the petitioner under the I.T.Act before the assessing officer and 13 the higher authorities and as such, the petition is not maintainable on this ground also. 3.2 It is also contended that though the prescribed period of six years to reopen the assessment of the petitioner for the assessment year 2013-14 expired on 31.03.2020, in view of Section 3 of the Taxation and other Laws (relaxation and amendment of certain provisions) Act, 2020, the period of limitation was extended upto 31.12.2020 and thereafter, upto 31.03.2021 vide Notification dated 29.10.2020 issued by invoking the enabling powers under the said Section 3 of the said Act. It is therefore contended that the impugned notice dated 31.03.2021 is within the extended period of limitation and the contention of the petitioner that the impugned notice is beyond the period of limitation is liable to be rejected. 3.3 The respondents have contended that in the return of income filed by the petitioner for the assessment year 2013 – 14, the petitioner merely disclosed the receipt of gifts in the balance sheet as part of long term investments at NIL value and neither the book value nor the market value of the shares of Wipro Ltd., were disclosed by 14 the petitioner. Further, in the notes to the accounts in the summary of the transactions with parties having substantial interest, the names of the settlors and only the number of shares of Wipro Ltd., gifted by them is mentioned and neither the book value nor market value of the shares were disclosed and as such, the return of income without disclosing the correct status and value of shares amounts to failure on the part of the petitioner to fully and truly disclose all material facts necessary for assessment for that assessment year. It is therefore contended that the assessing officer has correctly recorded that there are reasons to believe for reopening of assessment under Section 148 of the I.T.Act and the impugned notice seeking to re-open the assessment is in strict compliance and in conformity with the provisions of the I.T.Act and several decisions of the Apex Court including the decision in the case of Assistant Commissioner of Income Tax vs. Rajesh Jhavri Stock Brokers Ltd., - (2007) 291 ITR 500 (SC). It is also contended that for the purpose of issuance of the notice of reassessment, only a prima facie satisfaction is required on the part of the assessing officer 15 and a detailed enquiry is neither required nor warranted at that stage and on this ground also, the impugned notice is correct and proper. Putting forth these contentions and denying the various contentions urged by the petitioner, respondents have sought for dismissal of the petition. 4. I have heard Sri.S.Ganesh, learned Senior counsel appearing for Sri.Sandeep Huilgol for the petitioner and Sri.K.V.Aravind, learned counsel for the respondents and perused the material on record. 5. The material on record discloses that undisputedly, during the financial year 2012-13, which corresponds to assessment year 2013-14, the petitioner received equity shares of Wipro Ltd., from 3 donors. The petitioner filed its returns which are produced along with the auditor’s report as Annexure-F to the petition. The said gift transactions were disclosed in the audited financial statements for the year ending 31.03.2013. 6. On 09.06.2015, the Income tax officer issued a Notice to the petitioner under Section 142(1) of the I.T.Act calling upon the petitioner to furnish details regarding 16 assessment proceedings. In the said notice, petitioner was called upon to produce complete list of donors with address, PAN and the amount donated. The petitioner issued a reply dated 22.06.2015 furnishing all the details sought for by the respondents, pursuant to which, the respondents passed an assessment order dated 31.03.2016 accepting the returns submitted by the petitioner. 7. Subsequently, on 11.03.2020, the respondents issued a notice under Section 133(6) of the I.T. Act calling upon the petitioner to provide information relevant for the proceedings in relation to financial year 2016-17; in the said notice, it was stated that the petitioner – assessee had been filing returns as “AOP / BOI” and in view of the decision of the Delhi High Court, the petitioner is to be assessed as an individual and reasons for filing the returns of income in the status of AOP / BOI is to be furnished by the petitioner to the respondents. 8. The petitioner submitted a reply dated 19.03.2020 explaining in detail to the respondents that apart from the 17 fact that the decision of the Delhi High Court was not applicable to the petitioner, the income tax returns and assessments made by the respondents categorizing the petitioner as a company was correct and proper and that the petitioner cannot be assessed in the status of an individual. 9. It is relevant to state that subsequent to the aforesaid reply submitted by the petitioner, the respondents did not proceed further in the matter; instead, the respondents issued the impugned Notice dated 31.03.2021 after more than one year proposing to reopen the assessment which has been impugned in the present petition. 10. The first question that arises for consideration is, whether on 31.03.2021, the respondents were entitled to reopen the assessment proceedings of the petitioner for the assessment year 2012-13 after the expiry of four years as contemplated in Section 147 of the I.T.Act; in this context, reliance is placed upon the proviso to Section 147 of the I.T.Act by the respondents in order to contend that the 18 respondents had a valid reason to believe that the undisclosed income had escaped assessment on account of the petitioner – assessee not disclosing fully and truly all material facts during the course of the original assessment. 11. The power / jurisdiction of the respondents – revenue to reopen assessments under Section 147 of the I.T.Act 1961, beyond the prescribed period of limitation on the ground that there were “income had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment” came up for consideration before the Apex Court while dealing with identical provisions in Section 34 of the I.T.Act, 1922, in the case of Calcutta Discount Company Limited vs. Income Tax Officer – AIR 1961 SC 372, wherein it was held as under:- 6. 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 19 also reason to believe that such “underassessment” has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 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 reassessment beyond the period of four years but within the period of eight years, from the end of the year in question. 7. No dispute appears to have been raised at any stage in this case as regards the first condition not having been satisfied and we proceed on the basis that the Income Tax Officer had in fact reason to believe that there had been an under-assessment in each of the assessment years, 1942-43, 1943-44 and 1944-45. The appellant's case has all along been that the second condition was not satisfied. As admittedly the appellant had filed its return of income under Section 22, the Income Tax Officer could have no reason to believe that underassessment had resulted from the failure to make a return of income. The only question is whether the Income Tax Officer had reason to believe that “there had been some omission or failure to disclose fully and truly all material facts necessary for the assessment” for any of these years in consequence of which the under-assessment took place. 20 8. Before we proceed to consider the materials on record to see whether the appellant has succeeded in showing that the Income Tax Officer could have no reason, on the materials before him, to believe that there had been any omission to disclose material facts, as mentioned in the section, it is necessary to examine the precise scope of disclosure which the section demands. The words used are “omission or failure to disclose fully and truly all material facts necessary for his assessment for that year”. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise — the assessing authority has to draw inferences 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, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority 21 has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. 9. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income Tax Officer might have discovered, the legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example — “I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents”. His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, amount to “omission to disclose fully and truly all material facts necessary for his assessment”. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the 22 section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them — including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. 10. Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else — far less the assessee — to tell the assessing authority what inferences whether of facts or — law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences — whether of facts or law he would draw from the primary facts. 11. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with 23 failure to communicate an inference, which he might or might not have drawn? 12. It may be pointed out that the Explanation to the sub-section has nothing to do with “inferences” and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income Tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose “inferences” to draw the proper inferences being the duty imposed on the Income Tax Officer. 13. We have therefore come to the conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. 14. The position therefore is that if there were in fact 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 “underassessment” that would be sufficient to give jurisdiction to the Income Tax Officer to issue the notices under Section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income Tax Officer had when 24 he assumed jurisdiction some prima facie grounds for thinking that there had been some non-disclosure of material facts. 15. Clearly it is the duty of the assessee who wants the court to hold that jurisdiction was lacking, to establish that the Income Tax Officer had no material at all before him for believing that there had been such non disclosure. To establish this the company has relied on the statements in the assessment orders for the three years in question and on the statement of Kanakendra Narayan Banerjee in the report made by him to the Commissioner of Income Tax for the purpose of obtaining sanction to initiate proceedings under Section 34 and also on his statement in the affidavit on oath in reply to the writ petition. The report is in these words: “Profit of Rs 5,48,002 on sale of shares and securities escaped assessment altogether. At the time of the original assessment the then Income Tax Officer merely accepted the company's version that the sale of shares were casual transactions and were in the nature of mere change of investments. Now the results of the Company's trading from year to year show that the Company has really been systematically carrying out a trade in the sale of investments. As such the Company had failed to disclose the true intention behind the sale of the shares and as such Section 34(1)(a) may be attracted.” 25 16. The only non-disclosure mentioned in the report is that the Company had failed to disclose “the true intention behind the sale of the shares”. Mr Choudhury contends that this is not an omission to disclose a material fact within the meaning of Section 34. The question whether sales of certain shares were by way of changing the investments or by way of trading in shares has to be decided on a consideration of different circumstances, including the frequency of the sales, the nature of the shares sold, the price received as compared with the cost price, and several other relevant facts. It is the duty of the assessee to disclose all the facts which have a bearing on the question; but whether the assessee had the intention to make a business profit as distinguished from the intention to change the form of the investments is really an inference to be drawn by the assessing authority from the material facts taken in conjunction with the surrounding circumstances. The law does not require the assessee to state the conclusion that could reasonably be drawn from the primary facts. The question of the assessee's intention is an inferential fact and so the assessee's omission to state his “true intentions behind the sale of shares” cannot by itself be considered to be a failure or omission to disclose any material fact within the meaning of Section 34. Indeed, an assessee whose contention is that the shares were sold to change the form of investment and not with the intention of making a business profit cannot be 26 expected to say that his true intention was other than what he contended it to be. Dealing with this question the learned Chief Justice has said: “The expression that the respondent had failed to disclose ‘the true intention behind the sale of shares’ may lack directness, but that deficiency of language is not sufficient to enable the respondent to contend, in view of the circumstances alleged, that no failure to disclose facts was being complained of. On the facts as stated by the Income Tax Officer, it is clear that there had been a failure to disclose the fact that the respondent was a dealer in shares and what the Income Tax Officer meant by the language used by him was that the respondent had not disclosed that the sale of shares had been of the nature of a trading sale, made in pursuance of an intention to make a business profit, and not of the nature of a change of investment, made in pursuance of an intention to put certain capital assets into another form. If that be so, it is equally clear that the Income Tax Officer who, by the way, was a successor to the officers who had made the original assessments, was not merely changing his opinion as to facts previously known, but was taking notice of a new fact.” 17. The learned Chief Justice seems to have proceeded on the basis that when from certain facts inferences are to be drawn there is a duty on the assessee to state what the correct inference should be and if he has made a wrong statement as regards 27 the inferences to be drawn that also is an “omission or failure to disclose a material fact”. For the reasons given earlier we do not think that this is the correct position in law. 18. It is clear therefore that if one looked at this report only it would not be possible to say that the Income Tax Officer had any non-disclosure of material facts by the assessee in mind when he assumed jurisdiction. It has to be remembered however that in sending a report to the Commissioner the Income Tax Officer might not fully set out what he thought amounted to a non-disclosure, because it is conceivable that the report may not be drawn up carefully and may not contain a reference to all the non-disclosures that operated on his mind. We have, however, on the record an affidavit sworn by the same Income Tax Officer who started the Section 34 proceedings. It is reasonable to expect that in this affidavit which was his opportunity to tell the court what non-disclosure he took into consideration he would state as clearly as possible the material facts in respect of which there had not been in his view a full and true disclosure. Mr Banerjee's statements in this matter are contained in paras 5, 6 and 7 of his affidavit. They are in these words: “5. With reference to paras 2 and 3 of the said petition, I crave reference to the assessment orders therein mentioned. The assessment order dated 15th February, 1945, was made by Sri Kali Das Banerjee 28 now Income Tax Officer Companies District II and the other two assessment orders were made by L.D. Rozario who is now in the employment of M/s Lovelock & Lewes. I find from the notes made by me in the order sheet of the assessment year 1944-45 and my order dated 7th July, 1944 that Mr Smith of M/s Lovelock & Lewes attended before me and stated that the profits of the Company arising out of dealings in shares were not taxable as the Company was not a dealer in shares and securities. Subsequently on 18th August, 1944, M/s Lovelock & Lewes wrote a letter to me setting out the contentions of their clients and inter alia stated that throughout the whole history the Company bought no shares whatsoever. Sri K.D. Banerjee was accordingly led to believe that the dealings in shares were casual transactions and were in the nature of mere change in investments and the profits resulting therefrom were not taxable. The assessment orders were made on the basis that the petitioner did not carry on any business dealings in shares. A copy of the said letter dated 18th August, 1944, as also the relevant portion of the note sheet are included in the schedule hereto anefnexed and marked ‘A’. 6. In the assessments for 1945-46 and 1946-47, which were completed in April 1950, the profits on sale of shares were included in the total assessable income of the Company it having been then discovered that the petitioner was in fact carrying on business in shares contrary to its representation that it 29 was not. The Company filed appeals before the Appellate Assistant Commissioner, which were rejected in September 1950, and the assessments were confirmed. The Company thereafter filed a second appeal before the Income Tax Tribunal which appeals are now pending. 7. With reference to para 5 of the said petition, I deny that I pretended to act under Section 34 of the Income Tax Act as alleged. I have reasons to believe that by reason of the omission or failure of the Company to disclose fully and truly all material facts necessary for its assessments, the income, profits and gains chargeable to income Tax had been under assessed. I recorded my reasons and made three reports one for each year) in the prescribed form and submitted them before the Commissioner of Income Tax and the latter was satisfied that it was a fit case for issue of a notice under Section 34 of the Income Tax Act. Thereafter I issued the prescribed notices under Section 34 of the Income Tax Act. The said reports were made and notices issued in respect of all the three years mentioned in the petition and copies of the report and notice for one of such years are included in the schedule hereto annexed and marked ‘A’. The report and notices for the two other years are exactly similar.” 19. It appears from this that the statements made by or on behalf of the Company which the assessing authority considered to amount to non-disclosure of 30 material facts were these: (i) the Company was not a dealer in shares and securities, and (ii) throughout the whole of its history the Company bought no shares whatsoever. It has not been suggested before us that, in fact at any time up to the conclusion of the assessment proceedings for the years 1942-43, 1943- 44 and 1944-45 the Company did in fact make a single purchase of shares. Clearly therefore the Income Tax Officer had no reasonable ground for thinking that anything as regards the purchase of shares had not been disclosed. The Company does not dispute that the statement was made on its behalf that it was not a “dealer” in shares and securities. It appears clear that the Income Tax Officers who made the assessments for the years 1942-43, 1943-44 and 1944-45 proceeded on the basis that this was an investment company and considered the question whether in spite of its being an investment company certain sales of shares wherefrom the Company made a profit were by way of trading in shares and not by way of changing the form of investment. Whether these sales by an investment company should in law be treated as trading transactions, and the profits made from the sales trading profits liable to tax, was the matter which it was the Income Tax Officer's task to decide. No duty lay on the Company to admit that these transactions were by way of trade. The fact that on behalf of the Company Mr Smith of Lovelock & Lewes stated that the Company was not a dealer in shares and securities does not therefore 31 amount to an omission to disclose fully and truly any material fact. 20. To ascertain whether the Income Tax Officer could have had in mind any non-disclosure as a ground for thinking that by reason of such non- disclosure an underassessment had occurred — apart from what was mentioned in the affidavit — we enquired from respondent's counsel whether he could suggest any other non-disclosure that might have taken place. Mr Sastri suggested two. One is that the sales had not been disclosed; the other that the memorandum and articles of association of the Company had not been shown. This suggestion is against the record and we have no hesitation in repelling it. Not only is it not the ground set out by the Income Tax Officer at any stage not even in the affidavit in court, but the matters mentioned by the officer that the assessee had claimed that the profits realised were of a casual nature obviously indicate that the assessee disclosed that a surplus resulted from the sales which were also disclosed. 21. The assessment orders it is true do not mention the details of the sales. They state however that the audited accounts of the Company were furnished. The sales of shares were expressly mentioned in the report. In these circumstances it is reasonable to believe that as regards sale of shares full details were in fact disclosed. 32 22. Nor can we believe that the two Income Tax Officers L.D. Rozario and K.D. Banerjee concluded the proceedings without referring to the memorandum and articles of association of the company. These officers knew well that the Company was claiming to be an investment company only. They had to consider the question whether sales were of the nature of trade or of the nature of change of investment. It is unthinkable that they would not examine the memorandum of association. Besides, it is pertinent to note that in para 4 of his affidavit Kanakendra Narayan Banerjee refers to the memorandum and articles of association and states that “by its memorandum of association the Company has been authorised to carry on the various kinds of business which have been specified in sub-section (1) and (2) of clause 3 of the said memorandum of associations”. He does not say that the articles or the memorandum of association were not shown during the assessment proceedings for the years 1942-43, 1943-44 and 1944-45. If he had any reason to believe that these were not shown he would have certainly mentioned that fact. For that would undoubtedly amount to non- disclosure of a material fact. 23. It must therefore be held that the Income Tax Officer who issued the notices had not before him any non-disclosure of a material fact and so he could have no material before him for believing that there had been any material non-disclosure by reason of which an under-assessment had taken place. 33 24. We are therefore bound to hold that the conditions precedent to the exercise of jurisdiction under Section 34 of the Income Tax Act did not exist and the Income Tax Officer had therefore no jurisdiction to issue the impugned notices under Section 34 in respect of the years 1942-43, 1943-44 and 1944-45 after the expiry of four years. 25. Mr Sastri argued that the question whether the Income Tax Officer had reason to believe that underassessment had occurred “by reason of nondisclosure of material facts” should not be investigated by the courts in an application under Article 226. learned counsel seems to suggest that as soon as the Income Tax Officer has reason to believe that there has been underassessment in any year he has jurisdiction to start proceedings under Section 34 by issuing a notice provided 8 years have not elapsed from the end of the year in question, but whether the notices should have been issued within a period of 4 years or not is only a question of limitation which could and should properly be raised in assessment proceedings. It is wholly incorrect however to suppose that this is a question of limitation only not touching the question of jurisdiction. The scheme of the law clearly is that where the Income Tax Officer has reason to believe that an underassessment has resulted from non-disclosure he shall have jurisdiction to start proceedings for re assessment within a period of 8 years; and where he has reason to believe that an underassessment has resulted from other causes 34 he shall have jurisdiction to start proceedings for reassessment within 4 years. Both the conditions, (i) the Income Tax Officer having reason to believe that there has been underassessment, and (ii) his having reason to believe that such underassessment has resulted from nondisclosure of material facts, must co-exist before the Income Tax Officer has jurisdiction to start proceedings after the expiry of 4 years. The argument that the Court ought not to investigate the existence of one of these conditions viz. that the Income Tax Officer has reason to believe that underassessment has resulted from non-disclosure of material facts cannot therefore be accepted. 26. Mr Sastri next pointed out that at the stage when the Income Tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences. 27. Mr Sastri mentioned more than once the fact that the Company would have sufficient opportunity to 35 raise this question viz. whether the Income Tax Officer had reason to believe that underassessment had resulted from non-disclosure of material facts, before the Income Tax Officer himself in the assessment proceedings and if unsuccessful there before the appellate officer or the Appellate Tribunal or in the High Court under Section 66(2) of the Indian Income Tax Act. The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. 28. In the present case the Company contends that the conditions precedent for the assumption of jurisdiction under Section 34 were not satisfied and come to the court at the earliest opportunity. There is nothing in its conduct which would justify the refusal of proper relief under Article 226. When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. In the present case we can find no reason for which relief should be refused. 12. In the case of Mohini Bai M.Sarda vs. First Income Tax Officer – 1991 SCC Online KAR 599, this Court held as under:- 36 14. Therefore, the question that arises for consideration on these facts is, whether the Income- tax Officer was put on notice that there was a trust created by the petitioner settling certain properties in favour of eight minor beneficiaries and that exemption was claimed in respect of the said income in her assessment? If this is the undisputed fact, can it be said that there was any failure on the part of the assessee-petitioner to furnish full and correct particulars, and if so whether there was reason to believe that any income had escaped assessment? 15. Learned counsel for the petitioner has relied upon the following decisions in support of his contentions: Calcutta Discount Co. Ltd. v. ITO[1961] 41 ITR 191 (SC). As laid down by the Supreme Court in Calcutta Discount Co. Ltd.'s case[1961] 41 ITR 191, if certain primary facts are disclosed by the asses-sees in the return, then the limited jurisdiction of the High Court would be to find out whether this information was sufficient for the Income-tax Officer to probe into the matter further and apply his mind to the aspect of clubbing the income that arose to the minor beneficiaries under section 64 of the Income-tax Act. 37 16. CIT v. Bhanji Lavji[1971] 79 ITR 582, wherein the Supreme Court held that it is for the Income-tax Officer to establish that the assessee has failed to disclose certain facts and material necessary for the assessment of income which had escaped assessment. 17. Learned counsel had relied upon the following decisions: Indian and Eastern Newspaper Society v. CIT[1979] 119 ITR 996 (SO); Y.V. Anjaneyulu v. ITO[1990] 182 ITR 242 (AP). 18. These two decisions were rendered under section 147(b) and, therefore, have no relevance. 19. The other decisions relied upon by the petitioner are: Thanthi Trust v. ITO[1989] 177 ITR 307 (Mad); Murlidhar Bhagwandas and Co. v. CIT[1990] 181 ITR 319 (Bom); New Excelsior Theatre P. Ltd. v. M.B. Naik, ITO[1990] 185 ITR 158 (Bom); Technocraft Industries v. G.S. Tung, 2nd ITO[1990] 185 ITR 465 (Bom). 20. In all these cases, the reassessment proceedings taken under section 147(a) were challenged. On the facts of each case, the High Court held that there was no basis for the plea that income had escaped assessment and further that 38 there was no failure on the part of the assessee to disclose true and correct facts. 21. In Technocraft Industries' case[1990] 185 ITR 465 (Bom), the appraisal report of the Assistant Director of Inspection that a number of creditors where mere name-lenders, was relied upon. It was observed by the Bombay High Court that the loans and confirmation letters from creditors were disclosed by the assessee along with the returns, and, therefore, there was no reason to hold the assessee guilty of suppression and the section 147(a) notice was quashed. It was also held that the information furnished by the Assistant Director of Inspection was very vague. 22. In Thanti Trust's case[1989] 177 ITR 307, the Madras High Court held that the assessee had disclosed the primary facts relevant for the assessment and he was under no obligation to instruct the Income-tax Officer about the inference. The notice under section 147(a) was, therefore, struck down. 23. In Murlidhar Bhagwandas and Co's case[1990] 181 ITR 319, the Bombay High Court found that there was disclosure of havala transactions by the assessee in the returns and for the fault of the Department in not investigating the matter further as to the genuineness of the hundis, it was not open to the Income-tax Officer to reopen the assessment under section 147(a). 39 24. As against this, learned counsel for the Department has relied upon the following decisions: Maharaj Kumar Kamal Singh v. CIT[1959] 35 ITR 1 : AIR 1959 SC 257. 25. That was a case arising under section 34(1)(b) of the 1922 Act. It was held that even in a case where a return had been submitted disclosing certain facts, if the Income-tax Officer erroneously fails to tax a part of the assessable income, it would be a case of bringing to tax the said part of the income which had escaped assessment. The Supreme Court was explaining the scope and the meaning of the word “information”, and held that it includes information as to the true and correct state of the law and so would cover the information as to relevant judicial decisions. This observation was made by the Supreme Court in the context of what is “information” for purposes of section 34(1)(b) of the Act. On the facts of the said case, certain income had escaped assessment owing to inadvertence or oversight of the Income-tax Officer and it was held that, in such a case, the assessment could be reopened by invoking section 34(1)(b). 26. The said decision is distinguishable on the facts of the present case and can have no application and does not help the Department's case. S. Narayanappa v. CIT[1967] 63 ITR 219 (SC). 40 27. It was a case arising under section 147(a) of the Income-tax Act. The Supreme Court enumerated the conditions required to confer jurisdiction on the Income-tax Officer to issue the notice under section 34 beyond the period of four years. On the facts of the said case, it was held that the conditions precedent were satisfied before the Income-tax Officer initiated action to reopen the assessment. The Supreme Court also observed that it would not be a matter for the court to examine whether the reasons on which the Income-tax Officer issued notices were sufficient to form a belief about the escapement and ruled that it is not a justifiable issue. The court further observed that the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. In the same case, the Supreme Court, however, held that it is open to the court to examine whether the 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. 28. This is no doubt the law laid down by the Supreme Court explaining the jurisdiction of the High Court. But the said ratio has to be applied having regard to the facts of each case. I am of the opinion that on the facts, the Supreme Court held that there was sufficient reason for the Income-tax Officer to form an opinion about the escapement in 41 that case, and the notice issued under section 34(1)(a) was upheld. 29.Anandji Haridas and Co. P. Ltd. v. S.P. Kushare[1967] 66 ITR (Sh. N.) 13 : AIR 1968 SC 565. 30. That was an appeal arising under the C.P. and Berar Sales Tax Act from Bombay. The Supreme Court explained the meaning of the word “information” occurring in section 34(1)(b) of the Income-tax Act and observed that it need not be necessarily from an outside agency and such information can be gathered from the assessment record itself leading to the belief that the income has escaped assessment or under-assessed. 31.CIT v. Ayodhyakumari[1985] 154 ITR 604 (Raj). 32. The High Court laid down that where reassessment has been made under section 147(a), it is open to the Appellate Assistant Commissioner, to treat it as one properly made under section 147(b) provided that on the material on record all the necessary conditions prescribed under section 147(a) are satisfied. This has no application to the facts of the present case. 33.T.M. Kousali v. Sixth ITO[1985] 155 ITR 739 (Kar). 42 34. This was a case where proceedings taken under section 147(a) were sustained under section 147(b). That was a case of the assessee being awarded higher compensation by the civil court and the assessee had failed to disclose the pendency of the claim for higher compensation before the civil court. That decision turned on the peculiar facts of the case, and has no analogy with the present case. 35. Miheer Hemant Mafatlal v. N. Rama Iyer, ITO[1986] 159 ITR 515 (Bom). 36. In this case, each of the petitioners had submitted that their share in the income of the estate was not liable to assessment in their hands pending administration of the estate. It was held that there was no ground to reopen the assessment and the information furnished was sufficient. This case helps the petitioner in this case, rather than the Department. 37.VXL India Ltd. v. ITO[1988] 173 ITR 124 (P & H). 38. It was held by the High Court that whether the income chargeable to tax has escaped assessment has to be decided under the provisions of the Act itself, including the jurisdiction of the Income-tax Officer, and not by way of a writ petition. 43 39. This view of the High Court is contrary to the rulings of the Supreme Court on the question of jurisdiction. 40. On these facts, the question that arises for consideration is whether the petitioner had disclosed all the facts necessary for the completion of the assessment in her case for the two years in question. As already stated, the petitioner had stated in Part III of the returns that the income arising to eight minor beneficiaries in Madan Lal Sarda Family Trust was not liable to be included in her returns. The very same Income-tax Officer who completed the assessment in the case of the trust was also the Income-tax Officer who had jurisdiction to assess the petitioner in her individual capacity. 41. What is required under section 147(a) of the Income-tax Act is that the assessee is required to furnish such particulars of income and all other material facts necessary for his/her assessment. This is not a case where the Income-tax Officer could find fault with the petitioner having regard to the fact that the petitioner had mentioned about the trust as well as the income arising to the minor beneficiaries in her returns and had also claimed exemption of that income in her hands in Part III of the returns. This information was sufficient to alert the Income-tax Officer to make further enquiries as to why the income arising to the minor beneficiaries should not be taxed in her hands under section 44 64(1)(vi) of the Income-tax Act. The Income-tax Officer having overlooked to take steps to assess the income of the minors in the hands of the petitioner, if it was permissible in law, it is not open to the Income-tax Officer to reopen the assessments in the petitioner's case invoking the provisions of section 147(a) of the Income-tax Act. 42. The decisions relied upon by the petitioner support her contentions. It cannot be disputed that the petitioner had disclosed the primary fact in her returns, viz., that the petitioner had executed a trust in favour of the eight minors. There was, therefore, no reason for the Income-tax Officer to say that the income had escaped assessment on account of the failure of the petitioner-assessee to disclose the income that has accrued to the petitioner which should have been taxed in her hands. 43. So far as the decisions relied upon by learned counsel for the Department are concerned, I have stated, while referring to them in their order, that they are all distinguishable and have no application to the facts of the present case. 44. On the other hand, the law that is well settled is that the burden is on the Department to show that the escapement has occurred on account of the failure on the part of the assessee to disclose the full particulars of the income. The other aspect of the case is, whether the Income-tax Officer had 45 reason to believe that the escapement had occurred on account of the omission or failure on the part of the assessee. The formation of belief must have a nexus to the failure of the assessee to disclose true and full particulars as held by the Supreme Court in Bhanji Lavji's case[1971] 79 ITR 582. It is sufficient if the assessee has disclosed all the primary facts and any further enquiry or investigation that is called for should be done by the Income-tax Officer. On the facts of the present case, it is clear that the information furnished by the petitioner in Part III of the returns was sufficient for the Income-tax Officer to enquire further into the matter and to take steps to include the income accruing to the minors in the assessment of the petitioner. This was a clear case of failure on the part of the Income-tax Officer rather than the assessee. 45. I am, therefore, of the opinion that, on the facts of the case, the Income-tax Officer was not justified in reopening the assessment invoking section 147(a) of the Income-tax Act. The writ petition is, therefore, liable to be allowed. The writ petition is accordingly allowed and the notices as per annexures-F and G dated August 8, 1985 issued by the First Income-tax Officer, Gulbarga, under section 148 of the Income-tax Act, 1961, are quashed. 46 13. So also, in the case of S.Narayanappa vs. Commissioner of Income Tax – AIR 1967 SC 523, the Apex Court held as under:- 2. On behalf of the appellant Mr Gopalakrishnan contended in the first place that the reasons which induced the Income Tax Officer to initiate the proceedings under Section 34 were justiciable. It was submitted that those reasons should have been communicated by the Income Tax Officer to the assessee before the assessment was made. In this connection, the further argument of the appellant was that those reasons “must be sufficient for a prudent man to come to the conclusion that the income had escaped assessment”. In our opinion, there is no substance in any one of these arguments. It is true that two conditions must be satisfied in order to confer jurisdiction on the Income Tax Officer to issue the notice under Section 34 in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year. The first condition is that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to income tax had been underassessed. The second condition is that he must have reason to believe that such “underassessment” had occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under 47 Section 22, or (ii) omission of 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 be satisfied before the Income Tax Officer acquires jurisdiction to issue a notice under the section. But the legal position is that if there are in fact some reasonable grounds for the Income Tax Officer to believe that there had been any non- disclosure as regards any fact, which could have a material bearing on the question of underassessment that would be sufficient to give jurisdiction to the Income Tax Officer to issue the notice under Section 34. Whether these grounds are adequate or not is not 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 to 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 the sufficiency of the reasons for the belief. Again the expression “reason to believe” in Section 34 of the Income Tax Act does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it differently it is open to the court to examine the question whether the reasons for the belief have a rational connection 48 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, the action of the Income Tax Officer in starting proceedings under Section 34 of the Act is open to challenge in a court of law. (See Calcutta Discount Co. Ltd. v. Income Tax Officer, Companies District I, Calcutta [41 ITR 191] 3. In the present case the High Court has pointed out that the Income Tax Officer when examining the relevant material in proceedings for Assessment Year 1955-56 found that the appellant had made investments to the extent of Rs 39,000 in the account year under question when the income assessed was only Rs 36,068. On further examination it was discovered that items of house property acquired long before the relevant accounting year had been suppressed. The High Court, therefore, held that the Income Tax Officer had reasonable grounds for thinking that there was non-disclosure on the part of the appellant and that there was underassessment for Assessment Year 1951-52. 14. The Division Bench of the Madras High Court in the case of Thanthi Trust vs. Income Tax Officer – 1972 SCC Online MAD 411, held as under:- 49 15. The learned counsel referred to the decisions in Calcutta Discount Co. Ltd. v. Income-tax Officer [[1961] 41 I.T.R. 191; [1961] 2 S.C.R. 241 (S.C.).] , S. Narayanappa v. Commissioner of Income- tax [[1967] 63 I.T.R. 219; [1967] 1 SCR. 590 (S.C.).] and Commissioner of Income-tax v. Hemchandra Kar [[1970] 77 I.T.R. 1; [1971] 1 S.C.R. 283 (S.C.).] in support of his plea that section 147 is intended to prevent unnecessary harassment of the assessees by the Income-tax Officers changing opinions at different stages on the same materials and that, therefore, the respondent can invoke the authority under section 34 of the old Act and section 147 of the new Act only if the conditions set out therein exist and not otherwise. 16. In Calcutta Discount Co. Ltd. v. Income-tax Officer [[1961] 41 I.T.R. 191; [1961] 2 S.C.R. 241 (S.C.).] the Supreme Court came to consider the scope of section 34(1) for the first time. In that case in the original assessments for the assessment years 1942-43, 1943-44 and 1944-45, profits realised by a company by sale of shares were not assessed to tax on the ground that they were in the nature of mere change in investments. The Income-tax Officer later proposed to initiate reassessment proceedings against the company by issuing notices under section 34, and in his reports to the Commissioner for the purpose of obtaining sanction he had stated that at the time of the original assessments the representations made on behalf of the company that the sales of shares were casual transactions in the nature of mere 50 change of investments were accepted, but that the company's accounts showed that it had been really and systematically carrying on a trade in the sale of investments, that the purchase and sale of shares were not casual transactions and that there has been a non-disclosure of the true intention behind the sale of shares. The Supreme Court, after dealing with the scope of section 34 of the Act exhaustively, if we may say so with respect, held that the question whether the sale of shares were by way of change of investments or by way of trading in shares had to be decided by the Income-tax Officer on a consideration of different circumstances, including the frequency of the sales, the nature of the shares sold, the price received as compared with the cost price, and several other relevant facts, that though it was the duty of the company to disclose all the primary facts which had a bearing on that question, the law did not require the company to state the conclusion that could reasonably be drawn from the primary facts, and that the Income-tax Officer who issued the notices did not have any material before him for believing that there had been any material non-disclosure by reason of which an underassessment had taken place. As to the scope of section 34, their Lordships of the Supreme Court stated [[1961] 41 I.T.R. 191, 207, 201 (S.C.).] : “The scheme of the law clearly is that where the Income-tax Officer has reason to believe that an under-assessment has resulted from nondisclosure he shall have jurisdiction to start proceedings for 51 reassessment within a period of eight years; and where he has reason to believe that an under- assessment has resulted from other causes he shall have jurisdiction to start proceedings for reassessment within four years. Both the conditions, (i) the Income-tax Officer having reason to believe that there has been under-assessment, and (ii) his having reason to believe that such under-assessment has resulted from non-disclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry of four years. The argument that the court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under-assessment has resulted from non- disclosure of material facts, cannot therefore be accepted. The position, therefore, is that if there were in fact 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 section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non-disclosure of material facts would not be open for the 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 52 thinking that there had been some non-disclosure of material facts. Clearly it is the duty of the assessee who wants the court to hold that jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been such nondisclosure.” 17. The above decision is clearly an authority for two propositions, (1) that the court must be satisfied as to the existence of the two conditions, namely, (i) reason to believe that there has been under-assessment, (ii) such underassessment has resulted from the non- disclosure of primary and material facts; and (2) that if all the primary and material facts had been placed by the assessee before the Income-tax Officer at the stage of the original assessment, the assessee cannot be said to be guilty of non-disclosure as the Income-tax Officer failed to draw a proper factual or legal inference from those basic and primary facts. 18. In S. Narayanappa v. Commissioner of Income- tax [[1967] 63 I.T.R. 219, 221, 222; [1967] 1 S.C.R. 590 (S.C.).] the Supreme Court again reiterated the same principle thus: “But the legal position is that if there are in fact some reasonable grounds for the Income-tax 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 53 sufficient to give jurisdiction to the Income-tax Officer to issue the notice under section 34. Whether these grounds are adequate or not is not 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 to 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 the sufficiency of the reasons for the belief.” 19. As regards the scope of the expression “reason to believe” in section 34 of the Act, their Lordships of the Supreme Court stated that it does not mean a purely subjective satisfaction on the part of the Income-tax Officer, that it postulates belief and the existence of reasons for that belief, that the belief must be held in good faith and it cannot be merely a pretence and that the existence of the belief and the reasons for the belief are justiciable. But on the question whether the assessee should be informed of the material available on which the belief was entertained, the Supreme Court has held that the Income-tax Officer is bound to disclose to the assessee the materials on the basis of which the belief that the income has escaped assessment was entertained. 20. In Commissioner of Income-tax v. Hemchandra Kar [[1970] 77 I.T.R. 1; [1971] 1 S.C.R. 283 (S.C.).] , an assessee, a Hindu undivided family consisting of 54 six members, had originally been assessed for the assessment year 1946-47. Following the demonetisation of high denomination notes in January, 1946, the assessee encashed notes of the value of Rs. 19,000 and five members of the family encashed notes of the aggregate value of Rs. 1,10,000. The Income-tax Officer reopened the assessments of the assessee and of the five members and by his reassessment orders made on January 31, 1955, included the sum of Rs. 19,000 in the reassessment of the family and the sum of Rs. 1,10,000 separately in the assessments of the five members in respect of the respective notes encashed by them. Two days later, i.e., on February 2, 1955, the Income-tax Officer issued a notice under section 34(1)(a) of the Indian Income-tax Act, 1922, seeking to include the sum of Rs. 1,10,000 in the hands of the family on the ground that the notes encashed by the five members belonged to the Hindu undivided family. The Tribunal upheld the said reassessment. The validity of that notice was challenged and ultimately the matter came to the High Court on a reference. The High Court held that the notice dated February 2, 1955, was not valid, since it was found that when the first reassessment was made the primary facts necessary for reassessment of the family were in the possession of the Income-tax Officer, that at the time of the first reopening of the assessment of the Hindu undivided family and of the individual members the question of assessment of the entire amount 55 represented by the high denomination notes was under direct consideration, that it was open to the Income-tax Officer to assess the whole amount of Rs. 19,000 and Rs. 1,10,000 in the hands of the Hindu undivided family at that stage, and that the escapement, if 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. 1,10,000 when he was in full possession of all the material facts. On appeal, the Supreme Court affirmed the decision of the High Court holding that because the primary facts were within the knowledge of the Income-tax Officer when he completed the first reassessment, the escapement of income took place by reason of the failure of the Income-tax Officer to include the sum of Rs. 1,10,000 in the assessment of the Hindu undivided family when he was in full possession of all the necessary and material facts and that in such a situation the requirements of section 34(1)(a) were not satisfied. 21. The above decisions dealing with the scope of section 34 of the Act have clearly pointed out that in matters of this kind one has to see whether the Income-tax Officer could have reason to believe that due to omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, there has been an escapement of income or whether the escapement of income has resulted by reason of the failure of the Income-tax Officer to draw the proper factual or legal inference 56 from the primary and other facts furnished by the assessee. It is well established by these and other decisions that the words “reason to believe” used in section 147 mean a belief which an honest and reasonable person based upon reasonable grounds would entertain on facts before him, that a notice under section 148 calling for a return need not set out the reason for such a belief, or specify the item of income which has escaped assessment or the source of income, or indicate whether it is issued under clause (a) or clause (b) of section 147, that the Income-tax Officer is, however, bound to disclose all the necessary materials to the assessee at the stage of the reassessment proceedings so as to enable him to put forward all his objections to the proposed reassessment. It is also well established by now that the Income-tax Officer is not required to convene the assessee, or to intimate to him the nature of the alleged escapement or to give him an opportunity of being heard, before he decides to issue a notice under section 148 (vide Commissioner of Income-tax v. Mahaliram Ramjidas [[1940] 8 I.T.R. 442 (P.C.).] ). The power to issue a notice under section 148 is made conditional on the Income-tax Officer recording his reasons under sub-section (2). The Income-tax Officer is bound to record his reasons before issuing a notice under sub-section (1), and it is on the basis of those reasons recorded by him the Commissioner's or the Board's sanction must be obtained in cases where action is taken after the lapse of four years or eight 57 years, as the case may be, as contemplated in section 151. Such reasons recorded by the Income- tax Officer need not be communicated or disclosed to the assessee before reassessment proceedings under section 147 actually commence, but they have to be disclosed to the court when his jurisdiction to issue the notice is challenged on the ground that there is no reason to believe that certain income has escaped assessment by omission or failure of the assessee to disclose fully and truly all material facts necessary for his assessment, and the Income-tax Officer has to justify his assumption of jurisdiction only on those recorded reasons. 22. The learned counsel for the petitioner submits that the Income-tax Officer, at the stage of the original assessment proceedings, had thoroughly examined all the facts which are now referred to in the counter- affidavit and was satisfied with the explanations given by the petitioner, and, therefore, the Income-tax Officer had no reason to believe that by reason of the omission or failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the various years the income, profits and gains, chargeable to income-tax for those years, have escaped assessment. According to the learned counsel, once the petitioner disputes that the Income-tax Officer had any reason before him to entertain the requisite belief and states that it had not omitted or failed to disclose fully and truly all material facts necessary at the stage of the assessment, it is 58 the duty of the Income-tax Officer to justify his action in issuing the notices by setting out in his counter- affidavit filed before the court all the facts and circumstances which led him to entertain the belief and by producing before the court all the materials in his possession. The learned counsel took us through the counter-affidavit filed in each of these cases and stated that the averments therein are so vague that no weight could be attached to the same. He also complains that no details are given in the counter- affidavits to show whether the respondent is invoking clause (a) or clause (b) of section 147. The learned counsel took pains to convince us that there had been a thorough and full-fledged enquiry by the Income-tax Officer as also by the higher authorities at all levels on the question of exemption of the income of petitioner- trust at the stage of the assessments, that all the relevant materials had been considered at that stage, and that the respondent proposed to initiate reassessment proceedings only on the basis of a change of opinion. He referred us to the various queries made by the Income-tax Officer at the stage of the assessments for the various years and also the replies given by the petitioner on various matters. 23. Though in the counter-affidavit it has been stated that the deponent was not aware of the fact that the earlier orders of exemption had been granted after a thorough and exhaustive enquiry by the Income-tax Officer, Mr. T.V. Viswanatha Iyer, the learned counsel appearing for the revenue, submits that we may 59 proceed on the basis that there was a thorough and exhaustive enquiry by the assessing officer at the stage of the assessments on the question of exemption of the income of the trust. According to him even if a thorough and exhaustive enquiry has been made by the Income-tax Officer at the stage of the original assessments, still section 147 could be invoked if fresh material which subsequently came to the possession of the department shows that the disclosure made by the petitioner at the stage of the original assessments was neither full nor true, and in this case the assessing officer had sufficient material before him to entertain a belief that the income of the petitioner had escaped proper assessment. The nature of the enquiry held at the stage of the assessments is said to be not quite relevant for the purpose of finding out whether the impugned notices have been properly issued. In support of his contention that even in cases where there has been full and elaborate enquiries at the stage of original assessment, section 147(a) could still be invoked, he refers to the decisions in Income-tax Officer v. Bachu Lal Kapoor [[1966] 60 I.T.R. 74; [1966] 3 SCR. 68 (S.C.).] , Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer [[1967] 63 I.T.R. 638; [1967] 1 S.C.R. 984 (S.C.).] Commissioner of Income-tax v. T.S.P.L.P. Chidambaram Chettiar [[1971] 80 I.T.R. 467 (SC).] and K.P. Arthanariswamy Chettiar v. First Income-tax Officer [[1972] 84 I.T.R. 51 (Mad.).] . In Income-tax Officer v. Bachu Lal 60 Kapoor [[1966] 60 I.T.R. 74; [1966] 3 SCR. 68 (S.C.).] the Supreme Court laid down the proposition that the acceptance of a return or the completion of the assessment does not take away the jurisdiction of the Income-tax Officer to issue a notice to reassess on the ground that the information supplied by the return was not correct. In Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer [[1967] 63 I.T.R. 638; [1967] 1 S.C.R. 984 (S.C.).] the Supreme Court held that the assessee does not discharge his duty to disclose by merely producing the books of account or other evidence. He has to further bring to the notice of the Income-tax Officer particular items in the accounts or the documents which are relevant. Even in cases where the Income-tax Officer, if he had been circumspect, could have found out the truth from the books and other documents produced, he is not precluded from exercising the power to assess the income which had escaped assessment. In the third case reassessment proceedings were upheld as fully satisfying the requirement of section 34(1)(a) notwithstanding the fact that the assessing officer had before him the item of undisclosed income, which was the subject-matter of the reassessment at the time of assessment. It was held that the fact that the officer could have further inquired into that matter but did not do so, did not take the case out of section 34(1)(a). In the fourth case, in the original assessment of an assessee, a borrowal from a banker was accepted as true and the interest paid thereon allowed as 61 deduction. But the said banker in the course of his assessment proceedings denied the advance to the assessee. Then a notice under section 147 was issued. That notice was challenged by the assessee contending that all the primary facts were before the assessing officer when the assessment was completed. A Bench of this court, to which one of us was a party, held that, notwithstanding the fact that the item of the borrowal from the banker was considered and allowed at the stage of the original assessment, still the Income-tax Officer could invoke section 147(a) on the basis of the subsequent information secured from a co-ordinate official who made the assessment on the banker, which, if accepted, would lead to a reasonable belief that the disclosure made by the assessee in the first instance was not true. Thus, we find the recent trend of judicial decisions to be that even if the Income-tax Officer has at the stage of assessment been satisfied with the facts and materials disclosed by the assessee and completed the assessment on the basis of such materials disclosed, if, subsequently, on receipt of information, he has reason to believe that some of the facts and materials were not true or complete, he would have reason to believe that income has escaped assessment due to the assessee's failure to disclose truly and fully all materials necessary for the assessment. 24. Though the impugned notices do not indicate whether the reopening is proposed under clause (a) 62 or clause (b), the learned counsel for the revenue states the Income-tax Officer proposes to reopen the assessments only under clause (a) and not under clause (b), and this, the learned counsel says, is clear from the notices themselves. He points out that reference to the sanction obtained from the Commissioner of Income-tax or the Central Board of Revenue in the notices indicates that action is being taken only under clause (a) of section 147, as no such sanction is necessary or contemplated in cases coming under clause (b). 25. We, therefore, proceed to consider whether the impugned notices could be sustained as having been validly issued for initiating proceedings under section 147(a). Clause (a) of section 147 may be usefully set out at this stage: “147. Income escaping assessment.—If— (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer, or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or………. he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned 63 (hereafter in sections 148 to 153 referred to as the relevant assessment year).” 26. A reading of the above section along with sections 148 to 153 shows that the right to take action under clause (a) of the said section is subject to the following conditions: (1) The Income-tax Officer should have reason to believe that income chargeable to tax has escaped proper assessment. (2) He should have reason to believe that such escapement was by reason of the omission or failure on the part of an assessee to disclose fully and truly all material facts for his assessment for that year. (3) He must issue a notice under section 148 calling for a return of income within the time limit prescribed in section 149. (4) He must, before issuing such a notice, record his reasons for doing so. (5) The notice under section 148 should be issued only after obtaining the prior sanction of the Commissioner or the Board under section 151 in cases where action is taken after the lapse of four or eight years respectively. (6) The assessment or reassessment under section 147 should be completed within the time limit prescribed under section 153(2). 64 27. It cannot be disputed that conditions Nos. 3, 4 and 5 are satisfied in those cases which fall under section 147(a). Condition No. 6 will not arise at this stage when the reassessment proceedings are yet to commence. The question is whether conditions Nos. 1 and 2 are satisfied in these cases. 28. To show that the above two conditions are satisfied, the learned counsel for the revenue has placed before us all the files relating to the issue of the impugned notices. While the assessment files show the nature of the enquiry conducted at the original stage as also the materials available before the Income-tax Officer at that time, the files relating to the issue of the impugned notices contain certain information which the Income-tax Officer is said to have received subsequent to the completion of the assessments for the nine years in question, as also his reasons for issuing the notice under section 148(1). Those reasons are contained in the reports submitted by him to the Commissioner of Income-tax and and also the Central Board for getting the requisite sanction under section 151 for initiating action under section 147(a). From those reasons set out for the various years it is seen that some new materials which were not available before the Income- tax Officer at the time of the original assessment have come to his possession from various sources. 29. The learned counsel for the petitioner, however, states that there is no allegation of non-disclosure of 65 primary facts in the counter-affidavits, that if the averments made therein are taken to indicate the substance of the materials available, they would not constitute any new material, for all those materials had been considered in elaborate detail by the Income-tax Officer at the stage of the original assessment, that a mere change of opinion on the part of the Income-tax Officer on the same materials will not enable him to initiate proceedings under section 147(a), and that the counter-affidavits cannot be supplemented at the time of arguments by the production of some records for the perusal of the court alone. We are not, however, inclined to hold that the counter-affidavit alone should be looked into for deciding the question of jurisdiction. It is true that some of the matters referred to in the counter- affidavits had been considered by the Income-tax Officer at the stage of the original assessments as seen from the series of correspondence between the petitioner and the department containing queries and explanations at that stage. But, a persual of the files and records produced before us shows that all the materials were not there at the stage of the original assessments but only a few of them had been considered and investigated. It is true that there is some overlapping of the items. But, from that circumstance alone, we are not in a position to say that all the materials which are now before the Income-tax Officer have been investigated at the assessment stage. We are unable, therefore, to say 66 that the Income-tax Officer has not acted in good faith and that he has issued the notices only with a view to have a fresh roving enquiry as alleged by the petitioner. 30. The learned counsel for the petitioner makes certain submissions with regard to the materials produced by the revenue before us whose details have not been set out in the various counter affidavits. It is contended that once a challenge is made by an assessee that the Income-tax Officer had no materials before him to entertain a belief that the income has escaped assessment the Income-tax Officer has to satisfy the court that he has acted within his jurisdiction in issuing the notice under section 148 and in initiating proceedings under section 147, by disclosing such materials as are in his possession to the court and also to the assessee so that whatever explanation he could offer in relation to those materials may be placed before the court so as to enable the court to properly appreciate the contentions of both the parties relating to the jurisdiction of the Income-tax Officer. It is pointed out that if a particular material is shown to be before the Income-tax Officer, the assessee if he becomes aware of that material may satisfy the court that the same material was before the Income-tax Officer even at the stage of the assessments, and that the Income-tax Officer merely in the guise of acting on a new material purports to change his earlier opinion. The petitioner's learned counsel also states that once 67 the matter comes before the court on a challenge being made by the assessee on the question of jurisdiction of the Income-tax Officer to issue a notice under section 148, the attempt to satisfy only the court about the existence of the material is not sufficient, that it is not a private matter between the Income-tax Officer and the court and that all materials which are disclosed to the court should also be disclosed to the assessee so that he will assist the court in deciding the question of jurisdiction. What the learned counsel in effect says is that the court will not be justified in deciding the question of jurisdiction on the files and records being shown to the court without the petitioner having the benefit of the information available therefrom, and that the court will have to decide the question of jurisdiction only after the disclosure of that information to the petitioner. The learned counsel, however, concedes that in exceptional cases where confidential and privileged documents are placed before the court, the adversary cannot have a right to peruse the same. But in cases where no privilege is claimed or where the documents produced are not confidential, the assessee, it is said, cannot be made to grope in the dark as it were for sustaining his plea that the Income-tax Officer has issued the notice without jurisdiction. 15. In the case of Income Tax Officer vs. Lakhmani – (1976) 3 SCC 757, it was held as under:- 68 7. It would appear from the perusal of the provisions reproduced above that two conditions have to be satisfied before an Income Tax Officer acquires jurisdiction to issue notice under Section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year viz. (1) the Income Tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (2) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under Section 139 for the assessment year to the Income Tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must coexist in order to confer jurisdiction on the Income Tax Officer. It is also imperative for the Income Tax Officer to record his reasons before initiating proceedings as required by Section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income Tax Officer that it is a fit case for the issue of such notice. We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income Tax Officer of the account books or other evidence from 69 which material evidence could with due diligence have been discovered by the Income Tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income Tax Officer with regard to the inference which he should draw from the primary facts. If an Income Tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. 8. The grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income Tax Officer to act is, therefore, not a justifiable issue. It is, of course, open to the assessee to contend that the Income Tax Officer did not hold the belief that there had been 70 such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression “reason to believe” does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot he merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income Tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law see observations of this Court in the cases of Calcutta Discount Co. Ltd. V. Income Tax Officer [AIR 1961 SC 372 : (1961) 2 SCR 241 : 41 ITR 191] and S. Narayanappa v. CIT [AIR 1967 SC 523 : (1967) 1 SCR 590 : 63 ITR 219] while dealing with corresponding provisions of the Indian Income Tax Act, 1922). 9. Keeping the above principles in view, we may now turn our attention to the facts of the present case. Two grounds were mentioned in the report made by the Income Tax Officer for reopening the assessment of the assessee respondent with a view to show that his income had been underassessed because of his failure to disclose fully and truly material facts necessary for the assessment. One was that Mohansingh Kanayalal, who was shown to be one of 71 the creditors of the assessee, had since confessed that he was doing only name-lending. The other ground was that Narayansingh Nandalal, D.K. Naraindas, Bhagwandas Srichand etc whose names too were mentioned in the list of the creditors of the assessee, were known name-lenders. So far as the second ground is concerned, neither the majority of the Judges of the High Court nor the learned Judge who was in the minority relied upon that ground. Regarding that ground, the learned Judge who was in the minority observed that no basis had been indicated as to how it became known that those creditors were known name-lenders and when it was known. The majority while not relying upon that ground placed reliance upon the case of Chhugamal Rajpal. In that case the Income Tax Officer while submitting a report to the Commissioner of Income Tax for obtaining his sanction with a view to issue notice under Section 148 of the Act stated: “During the year the assessee has shown to have taken loans from various parties of Calcutta. From D.I.’s Inv. No. A/P/Misc. (5) D.I./63-64/5623 dated August 13, 1965, forwarded to the office under CIT, Bihar and Orissa, Patna’s letter No. Inv. (Inv.) 15/65- 66/1953-2017 dated Patna September 24, 1965 it appears that these persons are name-lenders and the transactions are bogus. Hence, proper investigation residing these loans is necessary. The names of some of the persons from whom money is alleged to have been taken on loan on hundis are: 72 1. Seth Bhagwan Singh Sricharan 2. Lakha Singh Lal Singh 3. Radhakissen Shyam Sunder The amount of escapement involved amounts to Rs 1,00,000.” In dealing with that report this Court observed: “From the report submitted by the Income Tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee’s omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the Income Tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of Section 147. Therefore, he could not have issued a notice under Section 148.” Reference to the names of Narayansingh Nandalal, D.K. Naraindas, Bhagwandas Srichand etc. in the report of the Income Tax Officer to the Commissioner of Income Tax in the instant case does not stand on a better footing than the reference to the three names in the report made by the Income Tax Officer in the case 73 of Chhugamal Rajpal. We would, therefore, hold that the second ground mentioned by the Income Tax Officer i.e. reference to the names of Narayansingh Nandalal, D.K. Naraindas, Bhagwandas Srichand etc. could not have led to the formation of the belief that the income of the respondent assessee chargeable to tax had escaped assessment for that year because of the failure or omission of the assessee to disclose fully and truly all material facts. All the three learned Judges of the High Court, in our opinion, were justified in excluding the second ground from consideration, 10. We may now deal with the first ground mentioned in the report of the Income Tax Officer to the Commissioner of Income Tax. This ground relates to Mohansingh Kanayalal, against whose name there was an entry about the payment of Rs 74 annas 3 as interest in the books of the assessee, having made a confession that he was doing only name-lending. There is nothing to show that the above confession related to a loan to the assessee and not to someone else, much less to the loan of Rs 2500 which was shown to have been advanced by that person to the assessee-respondent. There is also no indication as to when that confession was made and whether it relates to the period from April 1, 1957 to March 31, 1958 which is the subject-matter of the assessment sought to be reopened. The report was made on February 13, 1967. In the absence of the date of the alleged confession. It would not be unreasonable to 74 assume that the confession was made a few weeks or months before the report. To infer from that confession that it relates to the period from April 1, 1957 to March 31, 1958 and that it pertains to the loan shown to have been advanced to the assessee, in our opinion, would be rather farf etched. 11. As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words “definite information” which were there in Section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in Section 147 of the Act of 1961 would not lead to the conclusion that action can now 75 be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 12. The powers of the Income Tax Officer to reopen assessment though wide are not plenary. The words of the statute are “reason to believe” and not “reason to suspect” The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the Income Tax Authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income Tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter’s failure or omission to disclose fully and truly all material facts was missing in the 76 case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs. 14. In the case of Assistant Commissioner of Income Tax vs. ICICI – (2012) 13 SCC 514, it was held as under:- 5. We have noted the submissions of both the parties. The petitioner is a public limited company engaged in the business of carrying on various non- banking financial activities. The present petition is concerning Assessment Year 1999-2000. The assessment of the petitioner for that year had been finalised under Section 143 of the Income Tax Act. An order in that behalf was passed earlier on 28-3- 2002 determining the income of the petitioner as Rs 27.72 crores. Thereafter the first respondent sought to reopen the assessment and the reasons for reopening the assessment recorded vide his letter dated 27-3-2006 disclose that it is essentially after having another look at the annual accounts which 77 had been furnished earlier. The officer records that now it is noticed that during that year the assessee Company had incurred a loss in trading in shares. The officer thereafter discusses the various entries appearing in the opening and closing stocks and purchases and sales of those stocks. Thereafter the officer has concluded that there is a loss of Rs 19.86 crores and that the loss was speculative one. He has therefore come to a conclusion that the income chargeable to tax to the extent of Rs 19.86 crores has escaped the assessment and that is how he has passed the order under Section 147 of the Income Tax Act although almost four years have gone after the assessment of the year concerned. 6. Mr Mistry, learned counsel for the petitioner, points out that the reasons given by the first respondent in his order dated 27-3-2006 are clearly based on the documents which the petitioner had already furnished, containing the accounts tendered by the petitioner. There is nothing new that has come to the notice of the Revenue at this point of time. It is only a different analysis which is now being done and the conclusion is being drawn that its income to the extent of Rs.19.86 crores has escaped the assessment. In his submission, this is impermissible under the powers that are available to the Revenue under Section 147 of the Income Tax Act. It can only be where there is a failure on the part of the assessee to make a true return which is what is provided in the proviso to Section 147 and 78 wherein such a reopening would be permissible after the expiry of four years. In the instant case, nothing of the kind has happened. 7. Mr Kotangale, learned counsel for the respondents, has drawn our attention to a judgment of the Apex Court in Srikrishna (P) Ltd. v. ITO [(1996) 9 SCC 534 : (1996) 221 ITR 538] . In this case, what is held by the Apex Court is that where certain loan transactions were relied upon and which were subsequently discovered to be false, reassessment proceedings were validly initiated. What is however material to note is that in that particular case the Court has given a clear finding that the assessee had created and recorded bogus entries of loan and, therefore, the Court held that the assessee could not say that it had truly and fully disclosed all material facts necessary for the assessment for the year concerned. 8. The second judgment relied upon by Mr Kotangale is Phool Chand Bajrang Lal v. ITO [(1993) 4 SCC 77 : (1993) 203 ITR 456] . In this case, the reopening was permitted in view of subsequent information which was found to be definite, specific and reliable. This subsequent information included the confession of the Managing Director that the company had not advanced any loan to any person during the period covered and for which certain cash loans were supposed to have been advanced. It was in the facts of this particular 79 development that the Apex Court held that the reopening was justified. 9. In the facts of the present case, there is nothing new which has come to the notice of the Revenue. The accounts had been furnished by the petitioner when called upon. Thereafter the assessment was completed under Section 143(3) of the Income Tax Act. Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analysis. In our view, this is not something which is permissible under the proviso to Section 147 of the Income Tax Act which speaks about a failure on the part of the assessee to make a proper return. In the present case, no such case is made out on the record. 15. In the case of New Delhi Television Ltd., vs. Deputy Commissioner – (2020) SCC Online 446, the Apex Court held as under:- 11. In our opinion, the following issues arise for consideration in this case:— (i) Whether in the facts and circumstances of the case, it can be said that the revenue had a valid reason to believe that undisclosed income had escaped assessment? 80 (ii) Whether the assessee did not disclose fully and truly all material facts during the course of original assessment which led to the finalisation of the assessment order and undisclosed income escaping detection? (iii) Whether the notice dated 31.03.2015 along with reasons communicated on 04.08.2015 could be termed to be a notice invoking the provisions of the second proviso to Section 147 of the Act? 12. At the outset we may note that it has been strenuously urged on behalf of the assessee that its assessment was done under scrutiny procedure and a very detailed procedure was followed during the original assessment proceedings and all aspects of the case were noted by the assessing officer. That may be true, but merely the fact that the original assessment is a detailed one, cannot take away the powers of the assessing officer to issue notice under Section 147 of the Act. Question No. 1 13. We would like to make it clear that we are not going into the merits of the allegations made against the assessee. At this stage we are only required to decide whether the revenue has sufficient reasons to believe that undisclosed income of the asseessee has escaped assessment and therefore there are grounds to issue notice. Obviously, during the 81 assessment proceedings the assessee will have the right to place material on record to show that the transaction in question was a genuine transaction. 14. It is trite law that an assessing officer can only re-open an assessment if he has ‘reason to believe’ that undisclosed income has escaped assessment. Mere change of opinion of the assessing officer is not a sufficient to meet the standard of ‘reason to believe’. Relevant portion of Section 147 reads as follows:— 147. Income escaping assessment.—If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment 82 year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject- matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:— 83 (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but— (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 84 (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. xxxxxxxxx 15. The case of the assessee is that the transaction of step-up coupon bonds was scrutinised in great detail by the assessing officer before he passed the order of assessment dated 03.08.2012. According to the assessee there is an attempt on behalf of the revenue to deliberately mix-up the transactions relating to the Netherlands subsidiary with the U.K. subsidiary. According to the assessee the order of the DRP for the assessment year 2009-10 is in two distinct compartments. While the DRP held the Netherlands’ transactions of Rs.642 crores to be a sham, the transaction of issuance of US$ 100 million convertible bonds was not questioned. Therefore, according to the assessee there was no 85 fresh material before the assessing officer to have reason to believe that the undisclosed income of the assessee had escaped assessment. 16. On behalf of the assessee it has been urged that once the transaction of step-up coupon bonds has been accepted to be correct, then the revenue cannot re-open the same and doubt the genuiness of the transaction. We are not in agreement with the first part of the submission but we make it clear that we are not commenting on the genuineness of the transaction, which will be considered by the concerned assessing officer. 17. On the other hand, on behalf of the revenue it is submitted that at the stage of issue of show cause notice the revenue only has to establish a tentative and prima facie view. At this stage, this Court is not expected to go into the merits of the case but can only ascertain whether the revenue has prima facie ground to show that it had reasons to believe that income has escaped assessment. It is further submitted that the scope of judicial review in such matters is very limited. It is also submitted that since the revenue discovered fresh tangible material subsequent to the assessment order of 03.08.2012, it cannot be said that the assessing officer did not have reasons to believe that income had escaped assessment. 18. The main issue is whether there was sufficient material before the assessing officer to take a prima 86 facie view that income of the assessee had escaped assessment. The original order of assessment was passed on 03.08.2012. It was thereafter on 31.12.2013 that the DRP in the case of AY 2009-10 raised doubts with regard to the corporate structure of the assessee and its subsidiaries. It was noted in the order of the DRP that certain shares of NNPLC had been acquired by Universal Studios International B.V., Netherlands, indirectly by subscribing to the shares of NNIH. As already noted above it was recorded in the reasons communicated on 04.08.2015 that NNPLC was not having any business activity in London. It had no fixed assets and was not even paying rent. Other than the fact that NNPLC was incorporated in the U.K., it had no other commercial business there. NNPLC had declared a loss of Rs.8.34 crores for the relevant year. It was also noticed from the order of the assessing officer that the assessee is the parent company of NNPLC and it is the dictates of the assessee which are important for running NNPLC. 19. Pursuant to the directions of the DRP, the assessing officer passed the final assessment order for AY 2009-10 on 21.02.2014 which also disclosed similar facts. 20. According to the revenue Tax Evasion Petitions were filed by the minority shareholders of the assessee company on various dates, i.e., 11.03.2014, 25.07.2014, 13.10.2014 and 87 11.03.2015, which complaints describe in detail the communication between the assessee and the subsidiaries and also allegedly showed evidence of round tripping of the assessee's undisclosed income through a layer of subsidiaries which led to the issuance of the notice in question. 21. Whether the facts which came to the knowledge of the assessment officer after the assessment proceedings for the relevant year were completed, could be taken into consideration for coming to the conclusion that there were reasons to believe that income had escaped assessment is the question that requires to be answered. Though a number of judgments have been cited in this behalf, we shall make reference to only a few. 22. In Claggett Brachi Co. Ltd., London v. Commissioner of Income Tax, Andhra Pradesh1, this Court held as follows:— “7. Two points have been urged before us by learned counsel for the assessee. It is contended that the Income Tax Officer has no jurisdiction to take proceedings under Sections 147 and 148 of the Income Tax Act because the conditions prerequisite for making the reassessments were not satisfied. The re-assessments were made with reference to clause (b) of Section 147 of the Act, and apparently the Income Tax Officer proceeded on the basis that in consequence of information in his possession he had reason to believe that income chargeable to tax 88 had escaped assessment for the two assessment years. From the material before us it appears that the Income Tax Officer came to realise that income had escaped assessment for the two assessment years when he was in the process of making assessment for a subsequent assessment year. While making that assessment he came to know from the documents pertaining to that assessment that the overhead expenses related to the entire business including the business as commission agents and were not confined to the business of purchase and sale. It is true, as the High Court has observed, that this information could have been acquired by the Income Tax Officer if he had exercised due diligence at the time of the original assessment itself. It does not appear, however, that the attention of the Income Tax Officer was directed by anything before him to the fact that the overhead expenses related to the entire business. The information derived by the Income Tax Officer evidently came into his possession when taking assessment proceedings for the subsequent year. In the circumstances, it cannot be doubted that the case falls within the terms of clause (b) of Section 147 of the Act, and that, therefore, the High Court is right in holding against the assessee.” 23. In Phool Chand Bajrang Lal v. Income Tax Officer2, this Court held as follows:— 89 “19…Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the same facts and material which was available with the ITO at the time of original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the “true” and “full” facts in the case and the ITO would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under Section 147 of the Act, on receipt of the information subsequently. The subsequent information on the basis of which the ITO acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was 90 relevant, reliable and specific. It was not at all vague or non-specific.” 24. In Ess Kay Engineering Co.(P) Ltd. v. Commissioner of Income Tax, Amritsar3, this Court held as follows:— “This is a case of reopening. We have perused the documents. We find there was material on the basis of which the Income Tax Officer could proceed to reopen the case. It is not a case of mere change of opinion. We are not inclined to interfere with the decision of the High Court merely because the case of the assessee was accepted as correct in the original assessment for this assessment year. It does not preclude the Income Tax Officer from reopening the assessment of an earlier year on the basis of his findings of fact made on the basis of fresh materials in course of assessment of the next assessment year. The appeal is dismissed. No order as to costs.” 25. A perusal of the aforesaid judgments clearly shows that subsequent facts which come to the knowledge of the assessing officer can be taken into account to decide whether the assessment proceedings should be re-opened or not. Information which comes to the notice of the assessing officer during proceedings for subsequent assessment years can definitely form tangible material to invoke powers vested with the assessing officer under Section 147 of the Act. 91 26. The material disclosed in the assessment proceedings for the subsequent years as well as the material placed on record by the minority shareholders form the basis for taking action under Section 147 of the Act. At the stage of issuance of notice, the assessing officer is to only form a prima facie view. In our opinion the material disclosed in assessment proceedings for subsequent years was sufficient to form such a view. We accordingly hold that there were reasons to believe that income had escaped assessment in this case. Question No. 1 is answered accordingly. Question No. 2 27. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed. 28. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round-tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creating a network of shell companies with a view to transfer its un-taxed income in India to entities abroad and then bring it back to India thereby avoiding taxation. We make it 92 clear that we are not going into this aspect of the matter because those complaints have not seen light of the day either before the High Court or this Court and, therefore, it would be unfair to the assessee if we rely upon such material which the assessee has not been confronted with. 29. Even before the assessment order was passed on 03.08.2012, the assessing officer was aware of the entities which had subscribed to the convertible bonds. This is apparent from the communication dated 08.04.2011. The case of the revenue is that the assessee did not disclose the amount subscribed by each of the entities and furthermore the management structure of these companies. We are not in agreement with this submission of the revenue. It is apparent from the records of the case that the revenue was aware of the entities which subscribed to the convertible bonds. It has been urged that these are bogus companies, but we are not concerned with that at this stage. The issue before us is whether the revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso Section 147 of the Act. This can only be done if the revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the revenue wanted to investigate the matter further at 93 that stage it could have easily directed the assessee to furnish more facts. 30. The High Court held that there was no “true and fair disclosure” in view of the law laid down by this Court in Phool Chand's case (supra), and the judgment of the Delhi High Court in Honda Siel Power Products Limited v. Deputy Commissioner Income-Tax4. We have already referred to the judgment in Phool Chand's case (supra), wherein it was held that where the transaction of a particular assessment year is found to be a bogus transaction, the disclosures made could not be said to be all “true” and “full”. Relying upon the said judgment the High Court held that merely because the transaction of convertible bonds was disclosed at the time of original assessment does not mean that there is true and full disclosure of facts. 31. We are unable to agree with this reasoning given by the High Court. The assessee as mentioned above made a disclosure about having agreed to stand guarantee for the transaction by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any, arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the 94 assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 03.08.2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee. 32. The fact that step-up coupon bonds for US$ 100 million were issued by NNPLC was disclosed; who were the entities which subscribed to the bonds was disclosed; and the fact that the bonds were discounted at a lower rate was also disclosed before the assessment was finalised. This transaction was accepted by the assessing officer and it was clearly held that the assessee was only liable to receive a guarantee fees on the same which was added to its income. Without saying anything further on merits of the transaction we are of the view that it cannot be said that the assessee had withheld any material information from the revenue. 33. According to the revenue the assessee to avoid detection of the actual source of funds of its subsidiaries did not disclose the details of the subsidiaries in its final accounts, balance sheets, and profit and loss account for the relevant period 95 as was mandatory under the provisions of the Indian Companies Act, 1956. It is not disputed that the assessee had obtained an exemption from the competent authority under the Companies Act, 1956 from providing such details in its final accounts, balance sheets, etc. As such it cannot be said that the assessee was bound to disclose this to the Assessing Officer. The Assessing Officer before finalising the assessment of 03.08.2012 had never asked the assessee to furnish the details. 34. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 08.04.2011 NNPLC had sent a communication to the Deputy Director of Income Tax (Investigation), wherein it had not only disclosed the names of all the bond holders but also their addresses; number of bonds along with the total consideration received. This chart forms part of the assessment orders dated 03.08.2012 in the case of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. The said two assessment orders were passed by the same officer who had passed the assessment 96 order in the case of the assessee on the same date itself. Therefore, the entire material was available with the revenue. 35. A number of decisions have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta5, wherein it was held as follows:— “(8)…The words used are “omission or failure to disclose fully and truly all material facts necessary for his assessment for that year”. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise — the assessing authority has to draw inferences 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, and ascertain on a correct interpretation 97 of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. (9) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income- tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example — “I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents.” His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to “omission to disclose fully and truly all material facts necessary for his assessment.” Nor will he be able 98 to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them — including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. (10) Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else — far less the assessee — to tell the assessing authority what inferences — whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what 99 inferences — whether of facts or law — he would draw from the primary facts. (11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn?” A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present case. 36. In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt 100 the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No. 1. However, that cannot lead to the conclusion that there is non-disclosure of true and material facts by the assessee. 37. It is interesting to note that whereas before this Court the revenue is strenuously urging that the assessee is guilty of nondisclosure of material facts, before the High Court the case of the revenue was just opposite. We may quote a portion of the counter-affidavit filed by the revenue in response to the writ petition filed by the assessee before the High Court which reads as follows:— “…It is evident from these facts that second proviso to Section 147 is clearly attracted in this case and first proviso to Section 147 is not applicable to facts of this case, i.e. in this case, the only requirement to reopen assessment U/s 147 was that the AO has reason to believe that any income chargeable to tax has escaped assessment. The second condition that the income should have escaped assessment due to failure on the part of the assessee to disclose fully and truly all material 101 facts necessary for making assessment is not relevant to decide issue before the Hon'ble Court” 38. This submission has been repeated a number of times in the counter-affidavit. Therefore, in our opinion the revenue cannot now turn around and urge that the assessee is guilty of nondisclosure of facts. We are also of the view that the revenue could not be permitted to blow hot and cold at the same time. 39. We are clearly of the view that the revenue in view of its counter-affidavit before the High Court that it was not relying upon the non-disclosure of facts by the assessee could not have been permitted to orally urge the same. Even otherwise we find that the assessee had fully and truly disclosed all material facts necessary for its assessment and, therefore, the revenue cannot take benefit of the extended period of limitation of 6 years. We answer Question No. 2 accordingly. 16. As held in the aforesaid decisions, the respondents – Revenue are entitled to invoke the proviso to Section 147 of the I.T.Act and reopen the proceedings even after the prescribed period of four years only if the petitioner – assessee had failed to fully and truly disclose all material facts for the purpose of assessment; failure on 102 the part of the assessee to fully and truly disclose all facts which are material, relevant and germane for the purpose of assessment is a sine qua non for the purpose of reopening the assessment; in other words, in the absence of any material to show that the facts which were not fully and truly disclosed by the assessee were material, relevant and germane for the purpose of assessment which had been concluded by the revenue, the revenue did not have jurisdiction or authority of law to reopen the assessment beyond the prescribed period of four years; so also, even assuming that all facts had not been disclosed by the assessee at the time of assessment, so long as the said facts are not material, relevant or germane nor have an impact or bearing on the assessment, it cannot be said that the petitioner – assessee had not fully and truly disclosed material facts so as to enable the respondents – revenue to reopen a concluded assessment. 17. In the instant case, it is the specific contention of the petitioner that all relevant and material facts had been stated and disclosed by the petitioner in its income tax returns as well as the reply to the queries put forth by the 103 respondents and the same having been accepted without any demur by the respondents who had concluded the assessment proceedings and passed an assessment order on 31.03.2016, the impugned Demand notice dated 31.03.2021 which was issued beyond the period of limitation of four years was illegal, arbitrary and without jurisdiction or authority of law. It is also contended that a perusal of income tax returns as well as the reply submitted by the petitioner on 22.06.2015 to the notice dated 09.06.2015 issued by the respondents will indicate that the face value / book value of the shares as well as the total market value of all the quoted investments including the shares had been mentioned / stated in the returns in addition to other material particulars and details and consequently, there has not been any failure of full and true disclosure of material facts for the purpose of assessment. 18. Per contra, it is contended by the respondents that the petitioner had not disclosed and full and true facts in as much as the book value and the market value of the shares gifted in favour of the petitioner was not disclosed either in the returns or in the reply submitted by the 104 petitioner and as such, the respondents were entitled to invoke the proviso to Section 147 of the I.T.Act and reopen the assessment. 19. As rightly contended by the petitioner, a perusal of the income tax returns submitted by the petitioner for the financial year 2012-13 will indicate that the same contains the following details:- (i) In the Annexures to the returns showing the schedules forming part of the Balance sheet, schedule – 3 contains the details of the investments, among which, long term investments are shown as A, B, C and D while short term investments are shown as A and B. (ii) At page No.1 of the schedules, among long term investments, quoted shares are shown at Sl.No.A, in which, shares of Wipro Ltd., having a face value of Rs.2/- each are shown as 49, 07,14,120 in number. (iii) At Page No.2 of the aforesaid schedules annexed to the returns, the details of the Wipro shares received by the petitioner as gift have been explained including how the aforesaid number of 49,07,14,120 had been arrived at by the petitioner. 105 (iv) At Page No.1 referred to supra, the total number of shares for the previous year i.e., 19,51,87,120 has also been stated. So also, at page No.2, the market value of all the quoted investments including the shares gifted in favour of the petitioner has been stated for assessment year 2012- 13 and 2013-14. 20. The aforesaid details contained in the income tax returns submitted by the petitioner clearly falsifies the allegation of the respondents that the book value of the shares had not been mentioned / stated by the petitioner; so also, undisputedly, in order to attract Section 56 (2) (vii) (c) of the I.T.Act, the aggregate fair market value should exceed Rs.50,000/-; the aforesaid details mentioned in the income tax returns are sufficient to indicate that even if the market value of 49,07,14,120 shares is taken at 1 paise per share, it would exceed the aforesaid fair market value of Rs.50,000/- for the purpose of income tax; in other words, in the light of all the details furnished by the petitioner in the returns including the total number of shares, the methodology adopted to compute / quantify the number of shares, the total number of shares for the previous 106 assessment year, the face value / book value of the shares being shown as Rs.2/- each and the total market value of the quoted investments including the gifted shares coupled with the fact that the market value of the shares of Wipro Ltd., which is the public limited company whose share value is available readily in the public domain, it cannot be said that the petitioner had failed to fully and truly disclose all material facts necessary for its assessment. 21. As stated supra, in the light of all the aforesaid material and relevant facts being fully disclosed by the petitioner in its returns, which were more than sufficient to complete the assessment, mere non-disclosure of the market value of the shares separately by the petitioner in its returns cannot lead to an inference that the petitioner has not fully and truly disclosed all material facts necessary for assessment; to put it differently, so long as all other material and relevant facts had been furnished and disclosed and it can be clearly discerned from the returns and the documents that the market value of the shares was in excess of Rs.50,000/-, simply because the market value of 49,07,14,120 shares had not been separately stated / 107 mentioned, it cannot be said that the respondents were entitled to take shelter under the proviso to Section 147 of the I.T. Act and seek to reopen the concluded proceedings of 2016 beyond the period of limitation on 31.03.2021. 22. The material on record also discloses that at the time of assessment proceedings, it was not the case of the respondents that the market value of the shares was a material fact that was not disclosed by the petitioner; on the other hand, in its notice dated 09.06.2015 issued under Section 142(1) of the I.T.Act, the only details sought for by the respondents was with regard to the complete list of donors with address, PAN and the amount donated. In the said notice, though there is a separate column which enables the respondents to seek details with regard to computation of income, audit report along with financial statements / schedules, additional information in this regard with regard to non-furnishing of the market value of the shares was not sought for by the respondents in the aforesaid notice dated 09.06.2015 (Annexure-G). This circumstance is also a pointer to the fact that the details furnished by the petitioner in its returns were sufficient and 108 that the petitioner had fully and truly disclosed all material facts. 23. In response to the aforesaid notice dated 09.06.2015, petitioner submitted a reply dated 22.06.2015 and provided complete details of the corpus donors including mail, address and PAN and enclosed documentary evidence of the same. Despite receiving the said reply and documents submitted by the petitioner, respondents did not seek further information / clarification from the petitioner either with regard to the details and documents submitted in the reply or with regard to the market value of the shares or the other details mentioned in the returns submitted earlier, thereby indicating that in view of the information already submitted by the petitioner including the market value of the total quoted investments including the market value of the shares apart from the fact that the market value of Wipro shares were readily available in the public domain and exceeding Rs.50,000/-, the respondents did not deem it necessary or warranted to call upon the petitioner to provide a separate market value of the shares. Accordingly, the respondents proceeded to 109 complete / conclude the assessment proceedings and passed an assessment order on 31.03.2016 accepting the returns submitted by the petitioner. Under these circumstances, I am of the considered view that the impugned notice at Annexure-A and the reasons for reopening the same vide Annexure-A which proceed on the sole premise that the petitioner had not disclosed the boom value and the market value of the shares which tantamount to not fully and truly disclosing material facts are clearly illegal, arbitrary, factually incorrect and perverse and contrary to the material on record warranting interference by this Court in the present petition. 24. As held by the Apex Court and other High Courts including this Court, in the aforesaid decisions, in order to invoke the proviso to Section 147 of the I.T.Act, it is incumbent upon the respondents to establish that the relevant material facts essential for the purpose of assessment had not been disclosed by the petitioner; it cannot be gainsaid that all facts / particulars which have not been stated / mentioned in the returns are not material facts and it is only those facts which would have an impact / 110 bearing upon the assessment that can be construed or treated as essential. In the instant case, all relevant material facts viz., details of shares for the assessment years 2011-12 and 2012-13 have been stated including the breakup, face value of the shares at Rs.2/- per share, the details of the shares for the previous year, market value of all the quoted investments including the shares etc., have been furnished by the petitioner and accepted at the time of assessment without any demur; under these circumstances, the respondents are not entitled to invoke the proviso to Section 147 of the I.T.Act in order to contend that the income from the shares has escaped assessment on account of failure on the part of the petitioner to fully and truly disclose all material facts. Viewed from this angle also, the impugned notice and the reasons assigned by the respondents deserve to be quashed. 25. As can be seen from the aforesaid decisions, it is the settled legal position that an assessee is under a duty or obligation to disclose only the basic and primary facts relating to his assessment and thereafter, it is for the Assessing officer to make further enquires and draw 111 inferences and if he does not do so for any reason , then the Revenue cannot contend that there was any failure or omission on the part of the assessee. In the instant case, after being in possession of all the relevant facts relating to the gifts of shares received by the petitioner, the Assessing officer consciously chose not to apply Section 56(2)(vii)(c) of the I.T.Act. However, after the expiry of the period of four years mentioned in the proviso to Section 147, the A.O has attempted to take a new view, which is not permissible in law. 26. It is well settled that in a case of reopening covered by the proviso to Section 147 of the I.T.Act, the reasons recorded must set out the exact particulars of the failure to disclose on the part of the assessee, on account of which the escapement of income has taken place and a ritual repetition of the proviso to Section 147 of the I.T.Act would not be sufficient. In the present case, the reasons recorded only state that though the number of WIPRO shares received as a gift were disclosed, but neither the book value nor the market value of the shares was disclosed in the Balance Sheet. This is factually incorrect 112 because the returns submitted by the petitioner indicate that the face value of the WIPRO shares (Rs.2/- per share) and also their market value as on 31.03.2013 which is included in the total market value of the quoted investments are clearly disclosed. In any event, the share of WIPRO is widely quoted and frequently traded and its market value from minute to minute is readily available and it cannot be said that the petitioner has failed to disclose the information which is in the public domain and is continuously available to everybody. Further, the reasons recorded do not even attempt to claim that the non-application of Section 56(2) (vii)(c) of the I.T.Act and the consequent alleged escapement of income was because the Assessing officer was allegedly unaware of the market price of WIPRO shares. For application of Section 56(2)(vii)(c) of the I.T.Act, even if a price as nominal as one paise is assigned to be the market value of each Wipro share received as a gift with the number of shares received as a gift being Rs.29.55 crores, the aggregate value will far exceed the limit of Rs.50,000/- specified in Section 56(2)(vii)(c) of the I.T.Act. Thus, in the facts of the case, it is axiomatic that 113 the Assessing officer considered Section 56(2)(vii)(c) of the I.T.Act not to be attracted at all rather than being unaware of the market price of WIPRO shares as alleged. The market price of these shares is irrelevant because in the reasons recorded, nowhere it is specifically alleged and established that the alleged escapement of income was by reason of the so-called non-disclosure of the share price. In any event, such an allegation even if made, would be false because the Balance Sheet states the market value and consequently, on this ground also, the impugned notice and reasons assigned by the respondents deserve to be quashed. It is therefore clear that the jurisdictional condition precedent laid down by the proviso to Section 147 i.e failure to disclose a material fact, which failure allegedly is the proximate cause of the escapement of income has not been fulfilled at all in the present case and the impugned notice deserves to be quashed. 27. Insofar as the decisions relied upon by the learned counsel for the respondents are concerned, the same are clearly distinguishable on facts and are not 114 adverted to for the purpose of the present case; suffice it to state that the impugned notice and order which proceed on the premise that the face value / book value of the shares has not been stated is clearly factually incorrect; so also, in the peculiar facts of the instant case and the details / particulars of the shares and their value already available with the respondents as stated supra, mere non-mentioning of the market value of the shares also is neither relevant nor germane for the purpose of invoking the proviso to Section 147 of the I.T. Act and consequently, the impugned notice and reasons deserve to be quashed on this ground also. 28. Insofar as the rival claims with regard to applicability of Section 56(2)(vii)(c) of the I.T.Act to the petitioner as well as the challenge to the impugned circulars dated 03.08.2012 and 31.12.2018 are concerned, in view of my finding above that the impugned notice and reasons assigned by the respondents being illegal and vitiated, since the proviso to Section 147 of the I.T.Act is inapplicable to the facts of the instant case, I am of the 115 considered opinion that it is not necessary to advert to the said other contentions for the purpose of adjudication of this petition. 29. In the result, I pass the following:- ORDER (i) Petition is partly allowed. (ii) The impugned Notice at Annexure-A dated 31.03.2021 and the reasons for reopening the assessment vide Annexure-M dated 09.04.2021 are hereby quashed. SD/- JUDGE Srl. "