9911796707
TMI Blog1959 (3) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... as any material for the Appellate Tribunal to hold that the credit of ₹ 3,263/- for 1944-45. ₹ 4,712/- for 1945-46 and ₹ 4,664/-for 1946-47 in the Andhra Bank in the account of Prafulla Chandra Sudha Khaddar Bandar represented the secret profits of the assessee. The assessee carries on business in rice and other commodities at Vijayawada. For the assessment years 1944-45, 1945-46, 1946-47 and 1947-48, the Income Tax Officer made assessments on 8-5-1946, 16-5-1946, 15-3-1947 and 12-3-1948 respectively. Later, the Income Tax Officer discovered that income under two heads had escaped assessment for all these years one under the head fictitious loans and the other deposits in the Andhra Bank in the account of Prafulla Chandra Sudha Khaddar Bhandar, in which the assessee had a 273rd share. Under the former head for the assessment years 1944-45, 1948-47 and 1947-48 a sum of ₹ 5,000/-, ₹ 11,000/-and ₹ 10,000/- respectively and under the latter head for all the four assessment years, a sum of ₹ 3,2637-, ₹ 4.712/-, ₹ 4,6647- and ₹ 9,600/-, respectively were said to have escaped assessment. In the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excess loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to Income Tax have escaped assessment for any year, or have been under assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under Clause (a) at any time within eight years and in cases falling under Clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any or the requirements which may be included in a notice under Sub-section (2) of Section 22 and may proceed to assess for reassess such income, profits or gains or recompute the loss or depreciation allowance; and the provisions of this Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation in 1948. Clause (a), by the amendment, only requires that the Income Tax Officer must have reasons to believe that on account of the failure of the assessee to make a return, or to disclose full and material particulars, income has wholly or partly escaped assessment. This is a subjective test showing that the belief must be that of an honest and reasonable person based upon reasonable grounds which, however, would exclude his acting on mere suspicion, gossip or rumour. Clause (b) which takes the place of the old Sub-section (1), requires the Income Tax Officer to have in his possession information and in consequence of such information he must have reason to believe that income has escaped assessment. The words 'definite' 'come into' and 'discovers' have been omitted in Clause (b) of the present Sub-section (1), with the result that the decisions under the old section no longer apply in so far as they were based upon these expressions in the old section. 3. In so far as Clause (a) is concerned, it is not the case that the assessee has not furnished any return, but that he has not fully and truly disclosed all material fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same set of facts. To do so would be to allow him deliberately to make piecemeal assessments. In support of this contention, he relies on the finding of the Appellate Assistant Commissioner expressed in the following words: This is clearly a case where the Income Tax Officer who made the original assessments set, part of the appellant's income, free from assessment on account of an error of judgment on his part. He proceeded on the assumption that the ostensible was the real, and that the pronotes executed by the appellant and sums covered by these promotes were genuine and investments of capital. That explains the demand that he raised under Section 18 for tax in respect of interest claimed to have been paid to the alleged nonresident loan creditors. It may here at once be stated that the Appellate Assistant Commissioner while so holding was of the view that another Income Tax Officer or for that matter even the same Income Tax Officer cannot be estopped from setting in motion proceedings to set right the error. 5. With respect to the first question, viz., whether the case falls under Section 34(1)(a) or (b), it may be stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not belong to it and represented accommodation cheques credited on behalf of some of the assessee's friends. The Income Tax Officer did not accept this explanation of the firm and considered that the deposits which aggregated to ₹ 4,712/- represented the assessee's undisclosed income which escaped assessment for the assessment year 1945-46. Similarly for the year 1944-45 a sum of ₹ 3,263/- and ₹ 4,664/- for the year 1946-47 were said to be the income of the assessee that escaped assessment. If the Income Tax Officer has reason to believe that due to the failure of the assessee to disclose these facts, income has escaped assessment, he can start proceedings under the provisions of Section 34 (1)(a). In our view, the facts and circumstances of the case show that the proceedings under Section 34 have been validly initiated. 6. The further questions to be considered are, whether there is any material for the Tribunal to hold that the amounts shown as borrowings and deposits in the Andhra Bank represent the secret profits of the assessee. In so far as the borrowings are concerned, the Income Tax Officer found that these sums were bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulla Chandra Sudha Khaddar Bhandar of which the assessee is a partner, while the other person who attested it was his friend. It was also found that this was the only loan which the creditor is supposed to have given. Similarly the creditor who lent the other sum of ₹ 5,000/- was also examined. He deposed that he gave the loan to the assessee out of the savings from handloom cloth business which he was carrying on for the last ten years, and that be had himself taken this money to Bezwada to give to the assessee. He says that because three or four persons of his village give loans to the assessee, whom he knew through his clerk, he also gave the money. This creditor is also a small businessman dealing in hand-loom cloth. He denied having maintained accounts. The persons who attested the pronotes at the time of the borrowal and repayment, viz., Kurmala Anjaneyulu, Venkayala Gopalarao and Surempalli Madana Gopalarao, are all clerks in retail cloth shop of the firm. In these circumstances, no reliance was placed on them. The other amount of ₹ 10,000/- for the year 1947-48 was similarly disbelieved after recording evidence of the creditor, one Nel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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