9911796707
TMI Blog1979 (8) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Whether, on the facts and in the circumstances of the case, there was any admissible material for the conclusion that the creditor was 'hawala hundi name-lender' and even if it was so, whether there was any material for the finding that the credit of Rs. 10,000 did not belong to him ?" The assessee is a registered firm and carries on the business of manufacture and sale of woollen cloth on wholesale basis. For the assessment year 1966-67, relevant to the accounting period ending June 26, 1965, the assessee filed its return of income declaring its income at Rs. 41,962. During the course of assessment proceedings, the ITO found a cash credit of Rs. 10,000 in the name of M/s. Amin Chand Moti Ram, Amritsar, in the account books of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, requested the ITO to summon the proprietor of the banker under s. 131 of the Act. As he had gone out of India and his address was not known, the notice could not be served upon him. The ITO thereafter directed the assessee to produce him at its own responsibility. The assessee expressed its inability to do so. It reiterated that the cash credit entry was a genuine one and relied on the cheque by which the amount had been repaid to the banker. The ITO rejected the plea of the assessee and added the amount of Rs. 10,000 to its income from undisclosed sources, vide order dated January 27,1970. The assessee went up in appeal before the AAC who upheld the order of the ITO, vide order dated June 4, 1970. It went up in second appeal against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adar in the case of the other firms and consequently the version of the assessee that it took loan from it was not acceptable. He, therefore, added the amount of Rs. 10,000 to the income of the assessee from undisclosed sources. The same view has been expressed by the AAC and the Tribunal. Section 147 of the Act, inter alia, provides that if the ITO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under s. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, he may assess or reassess such income for the assessment year concerned. The secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression 'reasons to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purposes of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law." This view was followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a case where the Income-tax Officer has reason to believe, on the basis of subsequent information, that the assessee had failed to disclose material facts truly. On the facts of the case, even though the breaking of a hundi racket on an all-India basis cannot have any rational connection with the loans to the assessee, yet the confessional statements of the creditors might have a rational connection with the loans to the assessee. That depends upon whether the confessional statements were related in any manner with the loans to the assessee. That material was not available in the order of the Tribunal. Therefore, the Tribunal would be justified in upholding the reopening of the assessment under section 147(a) if the confessional state ..... X X X X Extracts X X X X X X X X Extracts X X X X
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