1983 (12) TMI 99 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the reassessment proceedings.
2. Merits of the addition of Rs. 20,000 and interest of Rs. 600.
3. Directions issued by the Commissioner (Appeals) regarding reopening of the assessment for the year 1967-68.

Detailed Analysis:

1. Legality of the Reassessment Proceedings:
The primary challenge was against the legality of the reassessment proceedings initiated by the Income Tax Officer (ITO). The assessee argued that the ITO had fully considered the cash credits in the name of Bansi Lal Hans Raj during the original assessment proceedings. The ITO had directed the assessee to file certificates regarding new cash credits, which were duly placed on record and considered. The assessee contended that the reassessment was based on a mere change of opinion, which was not justified.

The revenue, on the other hand, relied on various judgments to justify the reopening of the assessment under section 147(a) read with Explanation 2. They argued that mere production of account books or other evidence does not amount to full disclosure within the meaning of the section.

The Tribunal found that the reassessment proceedings were not justified. It relied on the Supreme Court judgments in the cases of Lakhmani Mewal Das, Madnani Engg. Works Ltd., and Burlop Dealers Ltd., which emphasized that the reasons for the formation of belief must have a rational connection or relevant bearing on the formation of the belief. The Tribunal concluded that the ITO did not establish a live link or a proximate connection between the information received and the formation of his belief that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts.

2. Merits of the Addition of Rs. 20,000 and Interest of Rs. 600:
The assessee challenged the merits of the addition of Rs. 20,000 and the interest of Rs. 600. The Commissioner (Appeals) had found that the unexplained amount could only be Rs. 5,250 and justified the disallowance of the entire amount of interest of Rs. 600. The assessee argued that the loans were fully genuine and had been established as such during the original assessment proceedings.

The Tribunal agreed with the assessee, stating that the loans had been fully considered during the original assessment proceedings. It noted that the statement made by Ram Parshad Aggarwal was general in nature and did not specifically mention the assessee. Therefore, the reassessment proceedings and the addition on that account were without any basis provided under law.

3. Directions Issued by the Commissioner (Appeals) Regarding Reopening of the Assessment for the Year 1967-68:
The assessee also challenged the directions issued by the Commissioner (Appeals) regarding the reopening of the assessment for the year 1967-68 on the ground of illegality and that they were uncalled for.

The Tribunal did not specifically address this issue in detail but implicitly upheld the assessee's challenge by canceling the reassessment proceedings. It emphasized that the ITO had not established a live link between the information received and the formation of his belief that income had escaped assessment.

Conclusion:
The Tribunal allowed the appeal, canceling the reassessment proceedings on the grounds that they were without any basis in law. It held that the ITO had not established a live link between the information received and the formation of his belief that income had escaped assessment. The Tribunal relied on the Supreme Court judgments in the cases of Lakhmani Mewal Das, Madnani Engg. Works Ltd., and Burlop Dealers Ltd., and the latest judgment of the Punjab and Haryana High Court in the case of Jai Singh Kulbir Singh, which supported the assessee's case.