9911796707
TMI Blog1982 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... income as computed has been stated to be Rs. 7,571 by the answering respondents. Thereafter, a notice dated September 21, 1976, as issued under s. 148 of the Income-tax Act, 1961 (hereinafter referred to as " the said Act "), was served on the petitioner, asking it to furnish a return within 30 days from the date of service of notice, as the ITO, C-Ward, District 24-Parganas, respondent No. 2, had reasons to believe that the income of the petitioner chargeable to tax had escaped assessment within the meaning of s. 148 of the said Act. It was also the case of the answering respondents that such notice was duly served on September 23, 1976, on the petitioner, after obtaining the due and necessary sanction of the Central Board of Direct Taxes and the said notice was served within the period prescribed under s. 149(a)(ii) of the said Act. The petitioner has stated that the said notice was served at the end of the 16th year under s. 149 as mentioned above, apart from claiming that the sanction from the Central Board, as mentioned above, was obtained without any basis, materials or evidence. The answering respondents have of course stated that there were materials and grounds on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-firm has introduced its own concealed income in its books in the garb of alleged loans in fictitious names to the tune of Rs. 1,35,000 and the so-called payments shown as interest on such loans and that income has escaped assessment-approximate tax effect Rs. 6,188 and I direct the said reasons to be kept in the record ". The basis for the concerned initiation or the circumstances behind the same which have been indicated in the affidavit-in-opposition as filed, have also appropriately tallied with the reasons as disclosed. From such statements in the affidavit and reasons as disclosed, it would appear that the petitioner filed a disclosure petition before the Commissioner on June 26, 1965, under voluntary disclosure scheme, disclosing a sum of Rs. 8,16,000 which, inter alia, included the sum of Rs. 1,35,000 being undisclosed income for the said assessment year and in the disclosure petition, the petitioner had admitted that the various loans standing in the names of various parties in the balance-sheet filed for the said assessment year as well as for the subsequent years, were fictitious transactions. It has further been stated that in the balance-sheet for the said asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis or jurisdiction and in excess of the same. It has been claimed that there was in fact no material on the basis of which the concerned notice could be issued beyond the prescribed time-limit under s. 148 read with s. 149(a)(ii) of the said Act. Such non-fulfilment of the terms of requirements of the sections have of course been denied by the answering respondents. It was the case of the petitioner that in the course of assessment proceedings for the said assessment year, the petitioner was represented through its partner, Shri H. D. Mohta, who produced the books of account, details of expenditure and details of source of income for the concerned assessment year and had discussions with the assessing ITO, regarding the income and expenditure as involved and the said officer, being satisfied, completed the assessment in the manner as indicated hereinbefore. It has further been stated that for the assessment year 1961-62, the petitioner was assessed by the concerned ITO, by making an addition of Rs. 3,41,570 to the total income and such amount was added on peak basis on the basis of the disclosure, filed by the petitioner in 1965. The respondents have stated that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her been stated that respondent No. 1 was purporting to reopen the assessment for the said assessment year on a mere change of opinion and for the purpose of holding such roving and fishing investigation as mentioned above. In the facts and circumstances as indicated hereinbefore, the petitioner claimed that the notice under s. 148 of the said Act, as issued for the said assessment year, was illegal, invalid, without jurisdiction or in excess of the same, as the requirements under ss. 149(a)(ii) and 151(1) of the same Act were not fulfilled. It was also claimed that, in any event, the respondent No. could not have formed any belief on the basis of the alleged materials, that the income of the petitioner had escaped assessment for the said assessment year within the meaning of s. 147 of the said Act and as such also, the notice and all proceedings thereunder were illegal, void, invalid, without or in excess of jurisdiction. After denying such allegations as indicated above, the answering respondents have stated that as the petitioner itself admitted in the disclosure petition a sum of Rs. 8,16,000, which, inter alia, included the sum of Rs. 1,35,000, i.e., undisclosed income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch statements, the petitioner has used an affidavit-in-reply dated April 2, 1982. In the said reply, apart from denying the material allegations, the petitioner has filed the disclosure petition under s. 271 of the said Act. The annexures to the said disclosure petition were not disclosed truly and fully and Mr. Sen Gupta produced the disclosure petition along with the annexures filed therewith and parties advanced their arguments on the basis of such disclosure petition, the particulars whereof would be mentioned hereinafter. Mr. Roychowdhury claimed that the impugned action or initiation to be void and incompetent in view of the fact that the said assessment was duly completed on September 5, 1960, under the provisions of the 1922 Act and that too after making additions and disallowances and on considerations of relevant and available materials as disclosed. It was then contended by him that since the assessing ITO was Shri H. V. Upadhaya and he completed such assessment as mentioned above, on application of his mind and there has been no affidavit filed by him disclosing his subsequent satisfaction, which was or should have been the basis of the subsequent initiation, the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he words of the section are " reason to believe and not it reason to suspect ", apart from holding that finality of an order, cannot be changed or disturbed and interfered with, unless the necessary requirements of law are satisfied. It can also be deduced, according to Mr. Roychowdhury, on the basis of the concerned decision, that after a lapse of long years, in this case 16 years, the assessee should not be placed upon the rack and called upon to explain, not merely the origin and source of his capital contributions, but the origin of origin and the source of source as well. On a reference to the observations in the case of ITO v. Selected Dalurband Coal Co. P. Ltd. [1978] 113 ITR 489 (Cal), Mr. Roychowdhury claimed, that the concerned report, which was the basis of initiation of the proceeding in this case, should have indicated about omission or failure of the assessee to disclose fully and truly the material facts relevant for the assessment and those facts not having been depicted in the report and moreover when the deponent of the affidavit-in-opposition was not the assessing ITO and there was in fact no affidavit filed by him, the reasons as disclosed cannot and should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence, that the assessee had deliberately furnished inaccurate particulars of the income, relying on the facts and determination in the case of Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67 (P H), to the effect that before penalty can be imposed under s. 271(1)(c) of the I.T. Act, 1961, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income of the assessee and that the assessee had consciously concealed the particulars or had deliberately furnished inaccurate particulars of the income. Such observations were made on the facts of that case where while proceeding with the assessment of the assessee, the ITO noticed cash deposits of Rs. 12,000 appearing in the name of one R in the books of the assessee. When asked to prove the genuineness of these entries the assessee stated that he was not in a position to prove the genuineness of these entries and made statement " surrendering squared up account of Rs. 12,000 in the name of R ". The assessee was then assessed on an income of Rs. 65,046, which included the amount of Rs. 12,000, as against the returned income of Rs. 46,446. Consequently, a penalty of Rs. 6,768 at 50 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded by the decision of the Tribunal. In the facts and circumstances of the instant case, the High Court would be required to examine the statements made in the disclosure petition and then to examine the ingredients contemplated under s. 271(1)(c) and try to find out whether from the statements made in the disclosure petition it could reasonably be inferred that there was such an admission as held by the Tribunal and if there was no such admission whether penalty could be imposed under s. 271(4)(c). Thus the question in the background of the circumstances was certainly a question of law. The further facts in that case was that the assessee was originally assessed for the year 1957-58. In 1965, it credited certain amount under " Disclosure Capital Account " in its books in place of various hundi loan amounts and filed a petition under s. 271(4A) requesting the Commissioner to spread over the peak amount of hundi loan over a period of 10 years and it has further been held on such facts that though the assessee offered the amount to be assessed after spreading over the amount for a period of 10 years, the assessee did not make any statement to the effect that the amount in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that party, that he has done only name-lending, would not be enough to justify an action under s. 147 of the said Act and there must be a live link or close nexus between the materials coming to the knowledge of the officer concerned and the formation of his belief that the credit was not genuine and there should also be enough and sufficient materials for the necessary and reasonable formation of the belief. It was claimed by Mr. Roychowdhury that by the subsequent disclosure made under s. 271(4A) of the said Act, separate income of the partners and not that of the firm was disclosed and as such also the reopening against the firm was not proper. The requirements of the provisions in s. 149(a)(ii) or the particulars of the section have been indicated hereinbefore. In support of his submissions on the irregularity of the initiation of the proceeding after the long lapse of time, reference was made by the learned advocate for the petitioner to the facts and observations in the case of P. K. Nair v. . [1973] 90 ITR 512 (Ker). In that case, the petitioner filed a writ petition challenging the notices under s. 148 of the I.T. Act, 1961, in respect of the assessment years 1950-51, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was nothing to indicate that in any particular year, out of the years 1950-51 to 1954-55, income in excess of Rs. 50,000 had escaped assessment. In these circumstances, the requirements of s. 147(a) of the Act read with s. 149 had not been satisfied and the ITO had no jurisdiction whatever to initiate reassessment proceedings for the said five years, That apart, reference was made to the case of Gupta Cold Storage v. ITO [1978] 115 ITR 819 (All), where for the assessment year 1961-62, the assessee disclosed an investment of Rs. 54,852 on land and buildings of a cold storage. In the course of investigation there was a valuation of the assessee's cold storage by a valuation officer. The valuation officer submitted his, report in 1975, estimating the cost of construction of the building in which he included the wooden staging for stocking perishables, wooden staircase, insulated ceiling, etc., at Rs. 1,46,530. Thereupon, the ITO issued a notice under s. 148 on the ground that income in excess of Rs. 50,000 had escaped taxation by reason of the failure of the assessee to disclose fully and truly material facts necessary for assessment and on the question, whether the issue of the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53. On a reference to such facts and the observations, Mr. Roychowdhury contended that as really the amount involved was Rs. 35,000 which was less than Rs. 50,000 and not Rs. 1,35,000, the initiation was without jurisdiction, as the same was barred by time. It was also further contended by Mr. Roychowdhury that the reasons in this case being vague and indefinite, and as they do not constitute or disclose any materials even on the basis of the disclosure petition and furthermore when the same was rejected, the petitioner should be given the benefit of the observations in Addl. CIT v. Kanhaiyalal Jessaram [1977] 106 ITR 168 (MP). In the facts of that case, which were in the assessment of the assessee for the assessment years 1965-66 and 1966-67, the ITO included in the total income of the assessee the income standing in the name of the assessee's son, D, relying on a statement of the assessee that his son, D, was his benamidar in an application for settlement under s. 271(4A) of the I.T. Act, 1961, for the assessment year 1963-64. That offer for settlement had not been accepted, by the Department. On appeal, the AAC deleted the son's income from the total income of the assessee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed, in support of his contentions that the recording of reasons and the order of the Central Board of Direct Taxes, in this case, have not satisfied the necessary tests and the requirements of law. Mr. Roychowdhury contended that the dominant feature as observed in the case of CIT v. A. K. Das [1970] 77 ITR 31 (Cal), being firstly, the satisfaction of the ITO, secondly, such " satisfaction " of the officer concerned must be " in the course of any proceeding under the Act " and, thirdly, he may direct that such person shall pay by way of penalty, certain amount and the overall condition being that there has to be "concealment " in the matter of imposing penalty, such failures not being appropriately available in this case, the rule should succeed and the same be made absolute. Apart from the above cases, with notices and copies to the other side, Mr. Roychowdhury referred to five unreported judgments of this court, on the question of the circumstances and the procedure and the manner, which are relevant and necessary for initiation of proceedings under ss. 147 and 148 of the said Act. The first case, on which such reliance was placed, was the judgment dated June 16, 1972, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence, also relied on the confession in that case and more particularly on the confession of the parties claimed to be name lenders or known to be so, apart from the fact, that the petitioner was given opportunities to explain the position, but they had not acted on that basis or availed of such opportunities, and such conduct should be considered as an act of omission on their part to disclose fully or truly all material facts necessary for assessment. It has been observed that there is no legal obligation on the part of the assessee to oblige the Revenue to give any information or help the investigation after assessment has been completed for facilitating reopening of the assessment by them. The non-co-operation of or by the assessee with the Revenue was also claimed to be a relevant factor upon which they could in conjunction with the information in their possession, legitimately draw the inference against the assessee. Those contentions were not, of course, accepted on disclosure of reasons and more particularly when, either in the affidavit or in the order sheet or in the reasons as recorded, it was pleaded or mentioned that the assessments were reopened on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reasons, which were as under The books of account of the assessee for the accounting year 1364 B. S. disclosed the following credits in the name of one Lachmandas Lundaram, alleged to be a dealer in hundis: Date of loan Amount of loan Rs. 16-4-57 5,000 22-4-57 10,000 26-4-57 5,000 The amounts were stated to be loans against hundis and evidence produced in support were discharged hundis and certificates from the alleged creditor. Sri Lachmandas Lundaram was examined under s. 131 and it was noticed that he had no evidence or books of account to produce in support of the above loans. As a matter of fact, he had failed to substantiate the above advances by him to the assessee or to establish his creditworthiness on those dates to offer the loans. Mere allegations unsupported by verifiable evidence cannot be accepted as full discharge of onus of explaining the credits in the name of a third party in the books of the assessee. I have, therefore, reason to believe that the sum of Rs. 20,000 represented income of the assessee for the year of account, which escaped assessment. " It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the genuineness of the balance of loan of Rs. 1,20,000. Hence it appeared that the assessee's income from Revenue receipts escaped assessments owing to failure on its part to disclose fully and truly all material facts necessary for its assessment and on the basis of such reasons, it was found and observed that conditions precedent for the exercise of powers were not satisfied. The fifth unreported judgment was dated February 6, 1980, made by the learned Appeal Court in the case of ITO v. R. Shantilal Co. (Private) Ltd. (F.M.A. No. 859 of 1973) and in that case the determinations made by P. K. Banerjee J. as made in the fourth unreported judgment as mentioned above, were upheld, even though the learned advocate for the Revenue relying on to the statements in addition, information is in possession of the Department to show that the creditors from whom the assessee took loans during the year of account, were not genuine lenders inasmuch as the said alleged creditors have confessed on oath before the Department, saying that they were doing havala business and acted as name-lenders, after signing bogus hundis for a consideration and the names of the said creditors were (a) Giridhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the requirements of the statute and the guidelines, as laid down by the celebrated determinations as mentioned hereinbefore and cited at the Bar, in the matter of reopening an assessment, the affidavit disclosing the reasons should be filed by him. In case such officer is available, but the return to the rule is not filed by him, there would be no other way and hesitation but to hold and answer the lis against the Revenue and in favour of the assessee. But, if there are cases like the present one, viz., the assessing ITO is not available with the Department at the time of filing the return, because of his retirement or if he is not available at the relevant time of filing such return amongst other reasons because of his death or resignation, the affidavit as filed by the ITO, holding the charge and if he discloses that he has got himself acquainted with the facts from the records and duly discloses the reason why the concerned affidavit could not be filed by the assessing ITO and the statements in the affidavit as filed correspond with the reasons as disclosed from the records, then such affidavit, in my view, can be looked into and considered in a proceeding like the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain mistakes in the report as mentioned above, they also produced a copy from the certified copy of the judgment in that case. The said reference related to two assessment years, namely, assessment years 1962-63 and 1963-64, for which the previous years ended on March 31, 1962, and March 31, 1963, respectively. In the original assessment for the first year, the ITO accepted the cash credits in the account of one Radhakishan Almal of Rs. 27,000 as genuine after these cash credits had been investigated by him. On this aspect, the learned advocate for the assessee contended that the cash credits had been accepted after investigation. In the second year which was concerned, cash credits of Rs. 36,000 in the account of Surajmal Ganeshiram and Rs. 24,000 in the account of Amarchand Sureka were accepted after investigation by issuing summons to those persons concerned. In that year Rs. 9,000 in the account of the assessee's mother was also sought to have been accepted. The total amount thus came to be Rs. 69,000 for the second year. There was a disclosure petition filed by the assessee on or about July 6, 1967, before the Commissioner under s. 271(4A) of the I.T. Act, 1961, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to purchase peace of mind, the assessee had offered for assessment certain deposits by spread over. It was further the case of the assessee that these deposits were duly considered and accepted at the time of original assessment after considering the evidence. Therefore, it was submitted that the proceedings under cl. (a) of s. 147 of the Act could not be taken for those two years. The ITO rejected this contention and included the amounts in the assessee's income for the two years. The appeal preferred against such determination by the assessee did not succeed. Then the assessee moved the Tribunal and this time the assessee succeeded. The Tribunal was of the view that as the disclosure petition had not been accepted, the statement made in the disclosure petition could not be relied on as relevant material on which any reasonable belief could be formed that there was non-disclosure of primary facts which were required to be disclosed at the time of the original assessment. The Tribunal discussed the question of the effect of the disclosure petition, the effect of non-acceptance of the statement in the disclosure petition and came to the conclusion that reopening under cl. (a) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being genuine loans but represented its own money introduced in such names, by the petition dated June 22, 1965, before the Commissioner, West Bengal, under s. 271(4A) of the said Act and, furthermore, in the concerned enquiries none of the alleged loan creditors, even though duly summoned, appeared, and some of them could not even be traced. Such being the position, applying the test and principles as laid down in the case of CIT v. Nathuram Gokulka [1983] 141 ITR 791 (Cal), it can very well be said, found and observed that there were materials or reasonable nexus to the formation of the belief, that in the original assessment, the assessee had not truly and fully disclosed the relevant materials for the said assessment and, as such, the officer concerned could also form a tentative belief and that too in view of the discrepant statements as mentioned hereinbefore or available from the assessee. Such being the position, this court would not be justified in determining or deliberating at this stage, whether these materials were sufficient or was true or not and the officer concerned, on relevant materials or as would be lead at the concerned proceedings, would be entitled to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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