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TMI Blog1983 (12) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... icals imported to the following parties : Rs. 1. Shri V. N. Subbier ... 21,736 2. Central Chemical Agency, Bombay ... 21,717 3. Central Chemical Agency, Calcutta ... 74,349. Based on the statement made by the assessee that they had imported dyes and chemicals and thereafter sold them to the three parties referred to above for a gross profit of 14%, the assessment was completed by the ITO for the year 1966-67 on March 29, 1967, under s. 143(3) of the I.T. Act, 1961 (hereinafter referred to a "the Act"). For the subsequent year 1967-68, the assessment was finalised on February 3, 1968, under s. 143(3) on the same basis. For this year the ITO added the income of another firm, Sivagami Textiles, to the income of the assessee on the ground that the said Sivagami Textiles is a benami concern of the assessee-firm, though for the assessment year 1966-67, the ITO had accepted the statement of the assessee that the Sivagami Textiles was an independent concern and, therefore, its income cannot be clubbed with that of the assessee. Based on the finding rendered by the ITO in the assessment year 1967-68 that Sivagami Textiles is not an independent concern but a benami concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal assessment had caused enquiries to be made to find out whether the alleged sales of dyes and chemicals made to the various parties are true transactions, that those enquiries have revealed that the persons to whom the assessee claims to have sold dyes and chemicals were only fictitious persons and that the assessee's failure to produce its purchasers for verification before the ITO could also lead to the inference that the transactions of sale of dyes and chemicals cannot be true, and that the assessee should have dealt with the import licences as such at the then market rate. The Tribunal after upholding the power of the ITO to reopen the assessment under s. 147(b) proceeded to deal with the merits of the reassessment and ultimately held that the assessment of the income by the ITO is quite justified. Aggrieved by the decision of the Tribunal in respect of both the assessment years, the assessee had sought and obtained reference on the questions set out above. As already stated in respect of both the assessment years 1966-67 and 1967-68, the ITO had reopened the original assessment made under s. 143(3) of the Act. The reopening of the assessment for the year 1966-67 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee was not able to produce the various purchasers to whom it had sold dyes and chemicals cannot be a ground for invoking the power of the assessing authority under s. 147(b). The learned counsel for the assessee has referred to various decisions to indicate as to in what cases the ITO could invoke section 147(b) of the Act. According to the learned counsel for the Revenue, the materials which came to light after the original assessment was made clearly lead to the inference that income has escaped in the original assessment and, therefore, on the basis of those materials, the ITO is justified in invoking his jurisdiction to reopen the assessment under s. 147(b) of the Act. Having regard to the rival contentions set out as above, we have to see as to what are the facts that came to light and what are the materials that came into the possession of the assessing authority after the original assessment. It is seen from the assessment order that the assessee at the stage of the original assessment claimed that has effected sales of imported dyes and chemicals and photographic films to the extent of Rs. 79,935 for the assessment year 1967-68. Based on the assessee's cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemicals put forward by the assessee are only bogus transactions leading to the inference that the assessee should have sold the import licences as such and realised larger profits than what the assessee has mentioned in its return. The materials which came to light subsequent to the original assessments for the two years have been actually referred to in the revised assessment orders by the ITO. The AAC has in fact found that the assessee has admitted in its letter, dated January 9, 1968, addressed to the ITO that as the assessee-firm not having repatriated the fund declared by it on G.R.I. Export Forms within the time-limit laid down therein they have been put in the caution list and subjected to certain restrictions which are not conducive to carrying on the export business, that in order to avoid loss and to continue the exports as usual, constituted another firm by name Sivagami Textiles and all the goods of the assessee-firm were sold to Sivagami Textiles and the latter made the actual exports. Based on the said admission, the appellate authority affirmed the finding of the ITO that M/s. Sivagami Textiles was a branch of the assessee-firm. On the question, as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces for, dyes and chemicals on the basis of the market price for such import licences recorded in the " Economic Times " and " Viyapar ". Thus, it is clear that subsequent to the original assessment for the assessment year 1967-68, the following facts had come to the knowledge of the ITO: (1) That the Sivagami Textiles is not an independent concern, but it is a benami concern of the assessee-firm; and (2) That the persons to whom the assessee is said to have sold dyes and chemicals are fictitious persons leading to the inference that the assessee could not have imported dyes and chemicals in pursuance of the import licences but should have sold the import licences as such at the then market rate. Admittedly, the ITO at the time of the original assessment accepted the statement of the assessee that the Sivagami Textiles is an independent concern and that the persons to whom the dyes and chemicals were sold were genuine persons without making any independent enquiry of his own. The enquiries were caused to be made only after the assessment and the said enquiries revealed that the Sivagami Textiles is not an independent concern, but a benami concern of the assessee-firm and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he can reopen the assessment and reassess such income. In this case, it cannot be said that there is no information in the possession of the ITO., As already stated, on the materials gathered as a result of the enquiries and investigations made subsequent to the original assessment, it came to light that Sivagami Textiles is not an independent concern and that the persons to whom the assessee has sold the dyes and chemicals are fictitious persons leading to the inference that the assessee could not have sold the dyes and chemicals. Then the question is whether the information in the possession of the ITO could reasonably lead to belief that income has escaped assessment. Admittedly, the materials gathered subsequent to the original assessment showed that the income of Sivagami Textiles which is found to be a benami concern of the assessee has omitted to be included in the assessment and, therefore, there is reason to believe that income had certainly escaped assessment. At the stage of the original assessment, the assessee's plea was that it has sold dyes and chemical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he belief that income of the assessee exceeding Rs. 15,000 had escaped assessment and there was also no fact or material from which it could be inferred that there was any failure on the part of the assessee to disclose the material facts necessary for the assessment. In those circumstances, that court held that the conditions in s. 147(a) were not satisfied. It is only in that context, the court observed that once all the primary facts necessary for the assessment were placed by the assessee before the assessing authority at the stage of the original assessment, he has discharged the obligations that lay upon him by disclosing and producing his books of account and other evidence and documents from which all the material facts could be discovered, that it Was for the assessing authority to make further enquiry if he was not satisfied with the books, papers and documents produced by the assessee and to find out whether the transactions shown by the assessee were genuine or false and that no duty is cast upon the assessee to inform the assessing authority as to who were the owners or proprietors of the various concerns to whom jute was sold or from whom jute was purchased by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the special facts of this case, it is unnecessary to refer to the various decisions cited by the learned counsel for the assessee, as the decisions in those cases rested on the special facts of the respective cases. In this view, we have to agree with the Tribunal and answer the first question in the affirmative and against the assessee. Coming to the second question, it is seen that the question as framed does not indicate the true scope. The said question refers to a finding of the Tribunal, but it does not say which of the findings of the Tribunal the assessee is challenging under that question. However, having regard to the fact that the question refers to the direction given by the Tribunal to rehear the appeal, we take it that it refers to the findings as regards the question as to whether Sivagami Textiles is an independent concern or it is a benami concern of the assessee. On that question, the Tribunal felt that the AAC has not given any specific finding as to whether the amounts invested by Navaneethammal in that concern as a partner came from the joint family or from her own funds and for purposes of ascertaining that fact, the matter has been remitted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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