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TMI Blog1968 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Wittemore Company Ltd. In the assessment proceedings, the assessee-company stated that during the negotiations for that purchase, a sum of Rs. 32,58,500 was advanced by the Canada company to the assessee-company to purchase shares of that value in the paper mills. In the record of the reasons made by the Income-tax Officer under section 148 of the Income-tax Act, 1961, which he incorporates in a communication which he addressed to the Commissioner of Income-tax on September 12, 1966, for the Commissioner's sanction for initiation of proceedings under section 147(a) for reassessment. He stated that what was described as a loan by the assessee-company was in truth commission paid by the Canada company for having arranged the purchase of the machinery by the paper mills. In the record which he so made, the Income-tax Officer assigned reasons which according to him induced the belief in his mind that what was stated to be a loan was in truth commission received by the assessee. He alluded to the fact that there had been no repayment of the loan, that there was no security for such repayment, that the purchase made by the paper mills was not supported by any original invoices and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat what empowers a proceeding under its provisions is the concealment of a material fact which is foundational to an assessment. So, if the assessee-company received a commission but stated that it was a loan, the disclosure of the receipt which is of course a material fact, affords no protection if its character, which is another equally material fact, was not truly stated. If a commission was received the fact that it was so received is as material to the assessment as the facts that there was a loan if there was one. Both those facts are material facts for the reason that commission is taxable income, while a loan is not. And, if what the assessee-company stated was not true, and what is true was not stated, there was an obvious concealment of a material fact necessary for the assessment. And, if the assessee-company made an untrue statement with respect to that material fact, it cannot with reason maintain that it made a full and true disclosure of a material fact. The pronouncement of the Supreme Court in Calcutta Discount Company's case, makes it unnecessary for us to discuss the other decisions cited before us. The argument that there were no reasons which could induce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly entertained that belief, and, when we examine the grounds on which that belief was founded, we find that it is scarcely possible for us to say that the reasons assigned by the Income-tax Officer for thinking that the transaction which was described as a loan was a make believe transaction designed to conceal the payment of a commission, are either extraneous or irrelevant. Whether those reasons can properly induce a finding that what was paid was commission, is not a question into which we can make an investigation at this stage. That is a matter pertaining to the sphere of sufficiency of evidence with which we are not concerned. But there can be little doubt that the features, such as those to which the Income-tax Officer referred, cannot be characterised as irrelevant or extraneous to the formation of the belief which is enjoined by section 147(a). We now proceed to consider the question whether the assessment of escaped income, if it was otherwise possible, could be made under the provisions of the new Act. In support of the argument that that was not possible, Mr. Srinivasan asked attention to the language of clause (a) of section 147 of the Act, which reads : " 147. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of clause (a) refer to assessment years which commence with the assessment year 1962-63, and not those preceding it. It is equally clear that what entails the commencement of a proceeding for non-disclosure of material facts is such non-disclosure with respect to those assessment years. In other words, it is only a case where there is a failure to make a return in respect of the assessment year 1962-63 and later assessment years or there is a failure to make a full and true disclosure of material facts with respect to those assessment years that a proceeding under section 147(a) read with section 148 could be commenced and not otherwise. That would be the position if section 147(a) is regarded as an exhaustive and complete statutory provision with respect to assessment or reassessment of escaped income under the new Act. But section 297(2)(d)(ii) makes it clear that the operation of section 147(a) cannot be restricted in that way. That clause reads : " 297. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred to as the repealed Act),-- . . . . . (d) Where in respect of any assessment year after the year ending on the 31st day ..... X X X X Extracts X X X X X X X X Extracts X X X X
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