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TMI Blog1978 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter, the assessment was sought to be reopened under s. 147 of the Income-tax Act, 1961, and a notice under s. 148 was issued and served on the assessee on the 31st March, 1969. The ground for reopening as recorded was as follows : " It was revealed in the course of investigation at subsequent stages that there were cash credits in the assessee's books of hundi loans in the accounts of bogus parties who by their confession made before the department at subsequent stages had stated that they had acted as name-lenders for third parties' accounts. This material fact necessary for assessment was kept concealed by the assessee at the original assessment stage." In compliance with the said notice another return of income was filed. The assessee, however, challenged the legality of the proceedings on the ground that there was no omission or failure on his part to disclose all material facts fully and truly in the course of original assessment proceedings. The contentions of the assessee were rejected by the ITO who completed the reassessment and made an addition of Rs. 15,000 to the assessee's income. Being aggrieved, the assessee preferred an appeal before the AAC, who upheld the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to believe that income of the assessee chargeable to tax had escaped assessment for the year 1960-61, by reason of any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The information which subsequently came to the knowledge of the ITO could not be said to have been and was not found to be within the knowledge of the assessee. It was not possible for the assessee to anticipate that a confession would be made by his creditor admitting that he had acted as a name-lender in respect of loans shown to have been advanced by him to third parties. In any event, there was no confession by any of the creditors that the hundis executed by the assessee were not genuine or that the assessee did not in fact obtain any money from them. Mr. Ray submitted that this piece of information might have formed the basis for reopening of the assessment under s. 147(b) but was not sufficient for a reopening under s. 147(a). In support of his contentions, Mr. Ray cited a number of decisions which we shall consider in their chronological order : (a) P. R. Mukherjee v. CIT [1956] 30 ITR 535. In this case, the question before a Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4] 51 ITR 12 (Mad). This decision was cited for a dictum laid down by the Madras High Court in respect of s. 34 of the Indian Income-tax Act, 1922, as follows : " The assessee is bound to be quite candid in the matter of placing all materials and facts before the department without in any way trying to hoodwink the authority and to escape taxation. Equally, the department is bound to discharge the statutory duty of making a proper assessment by examining with care and caution the materials that have been made available. Provided that the assessee has done all that be could or need do in the matter, the assessing authority cannot act perfunctorily with the hope and expectation that any error which he might commit by not making a proper assessment can subsequently be rectified by resorting to the machinery under section 34 of the Act ... In a case in which section 34(1)(a) is resorted to by the department it would be dangerous and certainly illegal to impute default on the part of the assessee in the matter of making a full and true disclosure of material facts merely from the non-performance or improper performance of the official duties by the assessing officer. " (c) CIT v. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judgment observed, inter alia, as follows : " It is not for the assessee to satisfy the Income-tax Officer that there was no concealment with regard to any question ; it is for the Income-tax officer, if that issue is raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income, which had escaped assessment. Failure to disclose how the delivery of ghee was given at Porbandar was wholly irrelevant, and failure to furnish particulars in that behalf cannot assist the case of the department ......... It was again no duty of the assessee to disclose to or instruct the Income-tax Officer that there were ' profits embedded in the receipt ' of the money at Bombay. Section 34(1)(a) does not cast any duty upon the assessee to instruct the Income-tax Officer on questions of law. The assessee had disclosed that ghee was delivered at Porbandar by him and the price in respect of those supplied was received in Bombay which was subsequently transferred to Porbandar. We are unable to accept the view of the Tribunal that the ' question of receipt of sale proceeds in British India was thus bypassed'." (e) CIT v. Burlop Dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation of the belief and are not extraneous or irrelevant for the purpose of the section." The facts before the Supreme Court were that an assessment was sought to be reopened on the basis of a confession of one of the creditors that he was only doing name-lending. The Supreme Court did not consider such confession to be a valid ground for reopening as there was nothing to show that the confession related to any loan to the assessee, and in particular to the loan of the assessee sought to be impugned. There was also no indication as to when that confession was made and whether it related to the period relevant to the assessment sought to be reopened. In the absence of the date of the alleged confession, it was assumed that it was made a few weeks or months before the report from which it could not be inferred that the confession pertained to the loan shown to have been advanced to the assessee. (h) Sujir Ganesh Nayak Co. v. ITO [1976] 104 ITR 524. In this case, the Kerala High Court construed the scope and effect of s. 147 of the Income-tax Act, 1961, in the background of all the judgments of the Supreme Court and observed as follows : " The controversy here centres round ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that reasonableness of a ground on which an assessment could be reopened under s. 147 was a question of fact. In the instant case, it had not been challenged that the ground on which the ITO proceeded was based on no evidence or was perverse and, therefore, the matter was concluded in favour of the revenue. In support of his competitions Mr. Bagchi cited a few decisions considered hereafter in their chronlogical order. (a) CIT v. Lakhiram Ramdas [1962] 44 ITR 726, where the Supreme Court observed as follows : "...what the Tribunal had to consider was whether the assessee had fully and truly disclosed all material facts necessary for the assessment.The Tribunal examined all the relevant materials produced by the assesse at the time of the original assessment and came to the conclusion that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The Tribunal referred to the account books produced by the assessee and particularly to the report of the examiner of accounts who submitted a report to the Income-tax Officer with regard to the bank account of the assessee in the Exchange Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a true fact. Similarly, when a document is said to have been disclosed, it implies that the document is a genuine one. To place before the Income-tax Officer any fact which is untrue or any document which is not genuine, is not to disclose a primary fact. If the hundi loans which were disclosed by the respondent to the Income-tax Officer as primary facts are found to be not genuine, in our view, there was no disclosure of primary facts. The Income-tax Officer reasonably believes that the hundi loans disclosed by the respondent at the time of the original assessment are bogus transactions. It is true that at the time of the original assessment the Income-tax Officer did not doubt the genuineness of the said transactions, but if, subsequently, he has reasons to believe that the transactions are not genuine at all, it is difficult to say that it is a mere change of opinion. A change of opinion by the Income-tax Officer contemplates formation of two different opinions or to make two different inferences at two stages on the same set of primary facts which are true." (e) M. Varadarajulu.Naidu v. CIT [1978] 111 ITR 301 (Mad). In this case, on the information that the alleged credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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