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TMI Blog1991 (4) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... gal representative of the assessee (as the assessee had died in the meantime). This notice was served on August 6, 1968. The ground on which notice was issued was that, in the opinion of the Income-tax Officer, the assessee had not furnished at the time of the original assessment true and full particulars of the loans obtained by him from various parties during the relevant assessment year. For the assessment year 1959-60, the original assessment was completed on April 10, 1961 on an income of Rs. 6,062. The Income-tax Officer, however, subsequently found that the assessee had not furnished the true particulars regarding the cost of construction of the house property in Delhi, the investment made therein and the amounts obtained from certain parties. Proceedings under section 147 for reassessment of the income for this year also were initiated by issue of notice under section 148 of the Act. This notice was also served on the legal representative of the assessee, hereinafter "the assessee", on March 21, 1968. The assessee objected to the initiation of proceedings for reassessment on the ground of non-existence of the conditions precedent for such initiation. The Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer at length. The Tribunal, therefore, came to a finding that the assessee had disclosed the true and material facts in respect of construction of the property in Delhi and investment made therein at the time of the original assessment, The Tribunal observed : "The assessee had disclosed not only the loan transactions but also the construction of the property. The assessee had given all primary facts and the Income-tax Officer had discussed the construction of the property in the original assessment order for the assessment year 1959-60. As regards the loans the assessee filed not only the confirmatory letters but also the letters of the parties who advanced the loans. This is what was expected of the assessee, i.e., to disclose the true and material facts at the time of the original assessment. The assessee has filed all these details. Under such circumstances, there is hardly any justification for taking action under section 147....." The Tribunal also referred to the decisions of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, S. Narayanappa v. CIT [1967] 63 ITR 219 and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and observed: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, it is clear that, to confer jurisdiction on the Income-tax Officer under the provisions of clause (a) of section 147 of the Act, to initiate proceedings for reassessment, two conditions have to be satisfied. Firstly, he must have reason to believe that income chargeable to tax has escaped assessment. Secondly, he must also have reason to believe that such escapement has occurred by reason of the omission or failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could assume jurisdiction to issue a notice for assessment or reassessment beyond a period of four years from the end of the relevant assessment year. In the instant case, the Tribunal held that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for either of the two years under reference and on the basis of this finding held the order of reassessment to be not tenable in law. This finding is the subject-matter of controversy before us. The preci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount and evidence from which material facts could be discovered : it was under no obligation to inform the Income-tax Officer about the possible inferences which may be raised against him. It was for the Income-tax Officer to raise such an inference and if he did not do so the income which has escaped assessment cannot be brought to tax under section 34 ( 1 ) (a). The aforesaid decision in Burlop Dealers' case [1971] 79 ITR 609 (SC) was followed by the Supreme Court in ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1. It was a case where the assessee had produced in the original assessment proceeding the hundis on the strength of which it had obtained loans from creditors as also entries in the books of account showing payment of interest. Subsequently, after a lapse of more than four years from the end of the assessment year, a notice was issued by the Income-tax Officer to the assessee to reopen the assessment on the ground that the transactions of loans represented by the hundis were bogus and no interest was paid by the assessee to any of the creditors and interest was wrongly allowed. The notice for reassessment on being challenged, the Supreme Court held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment." From the foregoing discussion, it is clear that the law on the subject is well-settled. The principles enunciated by the Supreme Court three decades back in Calcutta Discount Co. Ltd. [1961] 41 ITR 191 (SC) still hold the field. We do not want to traverse the same ground over again except to refer to some of the recent decisions of this court where these principles have been reiterated, elucidated and applied. We may first refer to the decision in Abdul Rab Abdul Salam v. ITO [1988] 174 ITR 424 (Gauhati) ; [1988] 2 GLR 75. In this case, referring to the provisions of section 147 (a), it was held (p. 427) "The principle in such cases is culled from the words in clause (a) of section 147 of the Income-tax Act. The words are whether the assessee disclosed 'fully and truly all material facts necessary for assessment'. Once the assessee does that, what inferences are to be drawn is in the hands of the Income-tax Officer. It is open to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end, 'except when legal ingenuity is exhausted'. To do so, is to divide one argument into two and to multiply the litigation'." This view was approved and followed by this court in Rajendra Singh v. Superintendent of Taxes [1990] 79 STC 10 (Gauhati) ; [1990] 1 GLR 449 and Abdul Rab Abdul Salam v. ITO [1988] 174 ITR 424 (Gauhati). This aspect of the matter pertaining to finality of decisions arrived at by the authorities was also discussed by the Privy Council in Hoystead v. Commissioner of Taxation reported in [1926] AC 155, 165, wherein it was observed: "... it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started, with a view to obtaining another judgment upon a different assumption of fact ; secondly, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of the original assessment. To draw an inference was the duty of the Assessing Officer. If the Assessing Officer was satisfied with the genuineness of the transaction at the time of the original assessment, it did not lie in the power of the subsequent Income-tax Officer to initiate action under section 147 of the Act. We have carefully considered the order of the Tribunal in the light of the provisions of section 147(a) and the principles enunciated by the Supreme Court and this court and, on a consideration of the same, we are of the clear opinion that, in the instant case, the assessee had disclosed fully and truly all material facts necessary for the purpose of assessment for the two assessment years at the time of the original assessment and, as such, the Income-tax Officer had no jurisdiction to initiate proceedings under section 147(a) of the Act for reassessment. The Tribunal was, therefore, justified in holding that the reassessment proceedings initiated by the Income-tax Officer in the instant case were not valid in law. In view of the aforesaid discussion, we answer the question referred to us in the affirmative and in favour of the assessee. Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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