1993 (7) TMI 1 - SC - Income Tax

ITO rightly initiated the reassessment proceedings on the basis of subsequent information which was specific, relevant and reliable and, after recording the reasons for the formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income chargeable to tax had escaped assessment - provisions of sections 147(a) and 148 were rightly invoked

Issues Involved:
1. Validity of reassessment proceedings under Section 147(a) of the Income-tax Act, 1961.
2. Obligation of the assessee to disclose true and full material facts during original assessment.
3. Sufficiency and reliability of information received post-assessment to justify reassessment.
4. Jurisdiction of the Income-tax Officer to reopen concluded assessments based on subsequent information.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147(a) of the Income-tax Act, 1961:
The Supreme Court examined whether the reassessment proceedings initiated by the Income-tax Officer (ITO) under Section 147(a) were valid. The ITO had reason to believe that income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for assessment. The ITO received specific information from the jurisdictional ITO at Calcutta, indicating that the Calcutta company, from which the assessee claimed to have borrowed Rs. 50,000, was a name-lender and had not advanced any loans. This information satisfied the conditions required under Section 147(a) for reopening the assessment.

2. Obligation of the Assessee to Disclose True and Full Material Facts During Original Assessment:
The Court emphasized that the assessee is obligated to disclose all material and relevant facts truly and fully during the original assessment proceedings. In this case, the assessee claimed to have borrowed Rs. 50,000 from the Calcutta company, which was later found to be a bogus transaction. The Court noted that merely disclosing the transaction without revealing its true nature does not fulfill the requirement of true and full disclosure. The ITO at Azamgarh had reason to believe that the assessee had not made a full and true disclosure, justifying the reopening of the assessment.

3. Sufficiency and Reliability of Information Received Post-Assessment to Justify Reassessment:
The Court analyzed whether the information received by the ITO from the jurisdictional ITO at Calcutta was sufficient and reliable to justify the reassessment. The Calcutta ITO informed that the managing director of the Calcutta company had confessed that the company was a name-lender and had not advanced any loans during the relevant assessment years. The Court found this information to be specific, reliable, and relevant, forming a valid basis for the ITO to believe that income had escaped assessment due to the assessee's failure to make a true and full disclosure.

4. Jurisdiction of the Income-tax Officer to Reopen Concluded Assessments Based on Subsequent Information:
The Court held that the ITO has the jurisdiction to reopen concluded assessments if he receives subsequent information that exposes the falsity of the facts disclosed during the original assessment. The Court distinguished between drawing a fresh inference from the same facts available during the original assessment and acting on fresh, specific, and reliable information received post-assessment. The latter justifies the reopening of the assessment under Section 147(a). The Court clarified that the sufficiency of the reasons for forming the belief is not for the court to judge, but the court can examine whether the belief was bona fide and based on relevant material.

Conclusion:
The Supreme Court upheld the validity of the reassessment proceedings initiated by the ITO under Section 147(a) of the Income-tax Act, 1961. The Court found that the ITO at Azamgarh had valid reasons to believe that the assessee's income had escaped assessment due to the failure to disclose true and full material facts during the original assessment. The information received from the jurisdictional ITO at Calcutta was specific, reliable, and relevant, justifying the reopening of the assessment. The appeal was dismissed, and the assessee was granted six weeks to furnish a reply to the show-cause notice issued by the ITO, Azamgarh.

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