9911796707
TMI Blog1981 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... O had allowed the assessee's claim for payment of interest amounting to Rs. 1,488 and Rs. 2,446 paid to Smt. Chandravalbai. He also did not take any action in respect of the fresh credits introduced in her name during the above two assessment years. After completion of the aforesaid assessment, the ITO took up the assessment proceedings for the A.Ys. 1972-73 and examined the genuineness of the cash credits in the name of Smt. Chandravalbai. During the above year, there was a credit balance of Rs. 21,248 in her name including Rs. 5,000, which were credited during the accounting period relevant for the A.Ys. 1972-73. In the books of accounts of the assessee, there was yet another account in her name styled as " Chandravalbai pyau ", which showed a credit balance of Rs. 10,000. The ITO required the assessee to establish the genuineness of the credits in the accounts of the lady and in this process he examined the creditor. Smt. Chandravalbai admitted having advanced the said amount to the assessee. As regards the source, she stated that she had a sum of Rs. 24,000 with her in the year 1943, which was kept by, her at home. The ITO did not accept this contention in view of a statement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AAC the assessee filed an appeal before the Income-tax Appellate Tribunal assailing the order of the AAC. The Tribunal rejected the appeal. Thereafter, on an application under s. 256(1) of the I.T. Act, 1961, by the assessee the aforesaid question has been referred to us by the Tribunal for our opinion. It is not in dispute that during the original assessment proceedings for the relevant years the assessees had filed copies of the balance-sheet, details of the interest account and also a copy of the pyau account and had shown the amount of interest on the amount advanced to him by Smt. Chandravalbai, the creditor. Now, the question is whether production of the aforesaid documents and disclosure of the nature of the transaction of loan on which interest was paid amounted to a disclosure to the ITO of the primary facts or not. Section 147(a) of the I.T. Act, 1961, under which action in this case has been taken by the ITO reads as under: " 147. If (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. There can be no doubt that the duty of disclosing all the primary facts relevant to, the decision of the question before the assessing authority lies on the assessee To meet a possible contention that when some account books or other evidence has been produced there is no duty on the assessee to disclose further facts, which on due diligence, the Incometax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example I have produced the account books and the documents: You, the assessing officer, examine them, and find out the facts necessary for your purpose : My duty is done with disclosing these account books and the documents.' His omission to bring to the assessing authority's attention those particular items in the account books or the particular portions of the documents, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have a material bearing on the question of I under-assessment', that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notices under section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non-disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax Officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some nondisclosure of material facts. Clearly, it is the duty of the assessee who wants the court to hold that jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been such non- disclosure." (Shah J., in his separate judgment, observed) (pp. 210, 217) " The expression 'reason to believe ' postulates belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. The expression does not mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not do. It was plainly case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The Income-tax Officer had all the material facts before him when he made the original assessment. He cannot now take recourse to section 147(a) to remedy the error resulting from his own oversight." Now, in the light of the aforesaid principles it has to be held that the assessee had placed in the possession of the ITO during the original assessment proceedings, all the primary facts. Accordingly, it was for him (the ITO) to make necessary enquiries and draw proper inferences as to whether the transaction of loan on which payment of interest was disclosed by the assessee, was a genuine transaction of loan or not. The ITO having failed to do so, it cannot be said that the assessee had not fully and truly disclosed all material facts necessary for the assessment in question. All the primary facts having been disclosed by the assessee to the ITO, if the ITO failed to hold further inquiry as discussed above merely bec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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