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TMI Blog1993 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... account and balance-sheet and had also filed details of various items appearing in its profit and loss account and balance-sheet for each of the said three years and the Income-tax Officer had completed the assessments after examining the audited account books including the details filed by the assessee-company. Subsequently, reassessment proceedings in respect of each of these three years were initiated by issue of notice under section 148 read with section 147(a) of the Income-tax Act, 1961, on March 18, 1981, January 28, 1983, and January 28, 1983, respectively. For the assessment year 1972-73, the Income-tax Officer, before initiating proceedings for reopening of assessments under section 147(a), recorded reasons which are set out hereinbelow : "The books of account and other documents of the company have been seized by the C. B. I., Bhubaneswar. Investigations conducted in the case helped to get possession of certain other books of account and documents which were prima facie genuine, corroborated by and large the points of allegation. I have reason to believe that, by reason of failure on the part ofthe assessee to disclose fully and truly all the material facts neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiating proceedings for reopening of assessments under section 147(a), has recorded reasons which are set out herein below: "In this case, the books of account and other documents were seized from the assessee-company in 1978-79 by the C. B. I., Bhubaneswar, which were handed over to the Income-tax Department subsequently. Some petitions for evasion of tax were also filed against the assessee before the D. D. I. (Int.), Calcutta. The A. D. I., Calcutta, extensively examined and scrutinised the seized books of account and the evasion petition. On the basis of such examination, it was found that the assessee-company had claimed many bogus expenditure like brokerage and commission to certain parties which were prima facie not genuine expenditure. For example, the assessee had paid brokerage and commission to one Sahualla Trading Company, Cuttack. Enquiries reveal that the assessee was getting raw materials from the Government and was supplying finished products to the Orissa State Electricity Board. Therefore, there was no question of any payment of commission on this account and the expenses claimed under this head are not genuine. The firm, Sahualla Trading Company, consisted of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of account for the calendar year 1971 seized by the Department and in the possession of the Inspecting Assistant Commissioner (Assessment) were not real and genuine set of accounts. The assessee's case was that its accountant, Shri Bhomraj Rathi and Shri M. L. Pansari, had written the second set of books of account to blackmail the assessee. It was also the case of the assessee that bogus entries were made in those books. The assessee claimed that the second set of books of account did not belong, to it. One of the directors of the assessee-company made a few admissions. Therefore, much was made out of those admissions regarding the second set of books of account. The Assessing Officer sought to attribute the second set of books of account to the assessee-company. It was alleged that some of the entries were not made in the first set of books of account and, therefore, there was an omission or failure on the part of the assessee-company to disclose the true and whole income. That was why the additions were made. The submissions made by learned counsel appearing for the assessee stressed that there were no other reasons for reopening than a change of opinion on the same materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable belief that income of the assessee-company for the said year had escaped assessment to the extent of Rs. 2.5 lakhs by reason of the assessee-company's failure to disclose fully and truly some primary facts in the course of the original assessment proceedings. The Income-tax Officer appears to have quoted only the provisions of section 147(a). The reasons themselves are stated to be the belief which is self-contradictory. The initiation of reassessment proceedings for this year is directly hit by the decision of the Supreme Court in Sheo Nath Singh v. AAC of I. T. [1971] 82 ITR 147 (SC) as well as by the decision of the Supreme Court in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, since it is an admitted position that the impugned notice under section 148/147(a) was issued in this case beyond a period of four years. The decision of the Delhi High Court in Asoke Kumar Sen v. ITO [1981] 132 ITR 707 as well as the two decisions of this court in Basanta Ram Kedarnath v. ITO [1987] 165 ITR 777 and CIT v. Dwarka Prosad Bazaz [1987] 168 ITR 572 also support the case of the assessee-company. As regards the assessment years 1974-75 and 1975-76, the only ground as stated in the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not understood as to what primary or material fact the assessee-company failed to disclose in regard to the claim of this commission and brokerage in the course of the original assessment proceedings. It is well-settled that reassessment proceedings under section 147 cannot be initiated after the expiry of four years from the relevant assessment I year unless income escapes assessment on account of failure on the part of the assessee to disclose fully and truly all material facts. Mere change of opinion cannot be a ground for reopening of assessment. No other ground has been given by the Income-tax Officer in the reasons recorded. The payment of commission and brokerage cannot become bogus merely because supplies are made to the State Electricity Board and the firm to which payment is made consists of sons and relatives of the directors of the payer company. This very aspect has been considered by the Supreme Court in Ganga Saran and Sons (P.) Ltd. v. ITO [1981] 130 ITR 1, where their Lordships quashed the reassessment proceedings initiated on the ground that payment of salary and bonus to one Mr. Dev Dutt, which was allowed in the original assessment proceedings appeared to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company was guilty of not having disclosed primary facts in the course of the original assessment proceedings. This is not the case here. In the other case H. A. Nanji and Co. [1979] 120 ITR 593 (Cal), the reasons recorded appear at pages 600 to 602 of the Reports. Detailed reasons were recorded therein by the Income-tax Officer. It was shown in the reasons recorded that certain loans were accepted in the course of original assessment proceedings merely on the basis of confirmation letters. It was subsequently found that the loan-creditors were bogus. It was also noted at page 611 of the Reports that reassessment proceedings were initiated not on the same set of primary facts as were available at the time of original assessment, but altogether additional materials which were not before the Income-tax Officer originally. In fact, this decision was subsequently considered by this court in the case of S. P. Agarwalla v. ITO [1983] 140 ITR 1010. This court distinguished Nanji's case [1979] 120 ITR 593 (Cal) and held that, unless there was evidence to show that the creditors concerned have made confessions to the effect that loans granted to the assessee concerned were bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results of the investigations nor the contents of the books of account find a place which alone could be the basis for a belief. Even for the other years, the only allegation in the reason is that the payment of brokerage and commission to the payee, Sahualla Trading Company, was a payment to a concern consisting of the relatives and sons of the directors of the assessee-company. Now, the question is whether, once the identity of the payee in the original assessment was disclosed, the assessee could be said to have furnished the primary fact. In the light of the decision of the Supreme Court in Calcutta Discount Co. Ltd. [1961] 41 ITR 191, it requires that one should be clear in one's mind as to what could be the test whether the fact disclosed in the first assessment, constituted a primary fact or there should have been more to it to make it primary fact. The Supreme Court, in the said decision, held that the assessee's obligation or duty is limited to disclosing the primary fact and nothing more than the primary fact. This necessarily brings us to the question what the test of primary fact could be how to know a primary fact from an inferential fact. As we see it, the primary fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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