1983 (1) TMI 81 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notices issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Income Tax Officer (ITO) to reopen assessments based on new information.
3. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment.
4. Applicability of Section 147(a) of the Income Tax Act, 1961.
5. Relevance of previous judgments and their applicability to the current case.

Issue-wise Detailed Analysis:

1. Validity of the notices issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notices issued under Section 148 of the Income Tax Act, 1961, for the assessment years 1964-65 and 1965-66. The petitioner argued that the ITO had no jurisdiction to proceed against it on the basis of a mere change of opinion after a period of four years from the original assessment. The court noted that the petitioner had disclosed all facts truly and fully at the time of the original assessment, and the ITO had accepted these facts after scrutiny.

2. Jurisdiction of the Income Tax Officer (ITO) to reopen assessments based on new information:
The respondent-authorities argued that the ITO had accepted the facts and material presented by the petitioner without making any inquiries into the individual items, and the total income was fixed mainly on the basis of the return. The ITO initiated proceedings for reopening the assessment on the basis that the parties in whose names cash credits appeared were established to be bogus hundi and hawala dealers. The court found that the ITO had reasons to believe that the petitioner had not fully and truly disclosed the material facts necessary for a proper assessment, and thus, the reopening of the assessment was justified.

3. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment:
The petitioner contended that it had disclosed all material facts necessary for the assessment, and the ITO had accepted these facts after investigation. The court, however, found that the facts alleged by the petitioner to be true or correct were found to be non-existent. The court noted that the petitioner had disclosed certain spurious papers and particulars regarding transactions that were themselves not facts, and thus, the disclosure made by the petitioner could not be considered a full and true disclosure of material facts.

4. Applicability of Section 147(a) of the Income Tax Act, 1961:
The petitioner argued that the assessment could be reopened only under the provisions of Section 147(a) of the Income Tax Act, 1961, within a period of four years. The court referred to previous judgments and found that in cases where the facts disclosed by the assessee are found to be bogus or non-existent, the ITO has jurisdiction to reopen the assessment. The court held that the facts or material placed by the petitioner before the ITO at the time of the initial assessment did not amount to any "disclosure" within the meaning of Section 147 of the Act.

5. Relevance of previous judgments and their applicability to the current case:
The court examined previous judgments, including those in Kirpa Ram Ramji Dass v. ITO, Frontier Trading Co. v. P. N. Chaudhry, ITO, Jash Bhai F. Patel v. CIT, and Jai Singh v. CIT. The court found that the facts in the current case were more akin to the facts in Kirpa Ram's case, where the disclosure made by the assessee was found to be formal evidence of fictitious transactions. The court distinguished the current case from Jai Singh's case and held that the ITO had jurisdiction to reopen the assessment based on new information that the transactions were bogus.

Conclusion:
The court dismissed the petitions and upheld the validity of the notices issued under Section 148 of the Income Tax Act, 1961. The court found that the petitioner had not fully and truly disclosed all material facts necessary for the assessment, and the ITO had jurisdiction to reopen the assessment based on new information. The court determined the costs at Rs. 300 in each case.