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TMI Blog1977 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of the profit loss account, balance sheet, copies of the accounts of various creditors including the one now impugned. The assessee also filed details of the interest paid to the various creditors and the interest received from the various parties. After scrutiny of the books of account and cash credit appearing in the books of account, the ITO completed the assessment on the income referred to above after satisfying himself about he genuineness of the accounts and the nature and source of the various credits received from the various parties. Subsequently the ITO initiated proceedings under s. 147 on the ground that some income had escaped assessment. This notice was issued on8th March, 1969and was served on the assessee sometime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account and was having transactions with bank. At the relevant time he could not be produced because his whereabouts were not known at the time of the reassessment. This reply did not satisfy the ITO. He held that the assessee had not disclosed all the material particulars to prove the genuineness for the loan, that enquires conducted showed that this party never existed, that the responsibility to prove the existence of the party and that the party had really advanced the money by way of loan to the assessee and that the money received by the assessee was by way of loan was on the assessee and that the assessee had not discharged this onus in the original assessment. Therefore, there was escapement of income to that extent of Rs. 20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to draw proper inferences it cannot be said that the assessee was at fault, so that the provisions of s. 147(a) would apply. The failure was on the part of the ITO, if at all there is any to draw proper inferences from the primary facts furnished. For the failure of the ITO the provisions of s. 147(a) could not be invoked but the provisions of s. 147(b) only could be invoked. If s. 147(b) is the proper provision held to be applicable, then the assessment made by he ITO was clearly time barred because the four years time limit under that section had expired by31st March, 1969while the assessment was made on1st March, 1973. He therefore, prayed that the assessment made by the ITO is illegal and should be quashed. In support of his propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the notice of the ITO not only about the existence of the loan but prove it by obtaining at least a letter of confirmation from the creditor if not produce him. Instead the assessee introduced the self serving document to beguile the ITO into believing him the genuineness of the credit and therefore the ITO was justified in taking recourse to the provisions of s. 147(a). The ITO had reasonable belief that income had escaped assessment and therefore his action must be upheld. He relied on several decisions of the Supreme Court particularly those reported in 63 ITR 290, 63 ITR 638, 84 ITR 60, 84 ITR 173, 84 ITR 616 and also the decisions reported in 103 ITR 599, 97 ITR 476, 102 ITR 96 and 98 ITR 337 all to show that if the material particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as repaid, the payment of interest by cheque, and the period for which the interest had been paid and the rate at which it had been paid. The pronote executed by the assessee has also been furnished to the ITO. The interest paid of Rs. 517.33 was claimed as a deduction and in the details for the interest paid this payment was specifically shown to the ITO. After applying his mind the ITO completed the assessment with the following observations : "The assessee has shown interest on deposits of Rs. 12,747 and claimed payment of interest of Rs. 11,303. Since the assessee is not money lender and the interest income, if any, is under the head other sources . Therefore, business income is taken at nil. It is further seen that interest of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which could be called for in aid to make good the deficiencies of the ITO in the first completed assessment. His duty is exercise due care and caution and to make intelligent enquiries still existed and failure to make such an enquiries at the time of original assessment did not justify a proceeding for reassessment. I found that this is exactly what happened in this case and these observations of the Calcutta High Court fully apply to the facts before him. In 77 ITR 789 the Assam High Court has to deal with almost identical case as before me and the High Court held that in those circumstances the provisions of s. 147(a) would not apply and that the case fell within the four corners of cl. (b) of s. 147. I am therefore of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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