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TMI Blog1977 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... r arriving at the business income and was thus claimed as deduction in the computation of business income. The assessee filed along with the returns the profit and loss account and also a statement of affairs or a balance-sheet as on the relevant dates. With reference to the assessment year 1957-58, there was a balance-sheet as at July 31, 1956, and on the liabilities side of the balance-sheet an amount of Rs. 55,000 was displayed as referable to certain loans taken on the strength of hundis. The assessee filed also particulars of the said hundi loans the total of which came to Rs. 50,000 and they did not show a loan of Rs. 5,000 in the name of one Madhawdas Kalyandas. For the assessment year 1958-59 also, the assessee filed a balance-sheet or statement of affairs as at July 31, 1957, wherein on the liabilities side a sum of Rs. 2,70,000 was shown as loans payable. The assessee filed particulars of hundi loans which included loans of Rs. 10,000 each from five persons, viz., Seth Tulsidas Lalchand, Seth Naraindas Jethanand, Seth Khumchand Vishumal, Seth Hariram Tiloomal and Seth Ramchand and Sons. The assessments for 1957-58 and 1958-59 were made under section 23(3) of the Indian In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Income-tax Officer certain statements in which figures relating to the impugned transactions were included, in the view of the Tribunal the assessee could not be taken to have fully and truly disclosed all material facts relating to the assessments. The Tribunal, therefore, upheld the validity of the reassessments for these two years under section 147(a) of the Act. It is this conclusion of the Tribunal which is challenged in the form of the question extracted already. The assessment proceedings have been reopened as mentioned already under section 147(a) of the Act. That provision, in so far as it is material, runs as follows : " If 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 truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, ....... he may, subject to the provisions of sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Supreme Court in Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437. In that case, the original assessment for the assessment year 1958-59 was made on the assessee after allowing certain deductions towards interest to certain creditors. Thereafter, by a notice under section 148, the Income-tax Officer sought to reopen the assessment. In this report made to the Commissioner of Income-tax for reopening the assessment, two reasons were given, viz., (i) that M.K., who was shown to be one of the creditors of the assessee, had since confessed that he was doing only name-lending ; and (ii) that N.M., D.K.N., B.S., and others, whose names too were mentioned in the list of the creditors of the assessee, were known name-lenders. The assessee thereafter filed a writ petition claiming that there was no material before the Income-tax Officer on which he could have reason to believe that income chargeable to the assessment for the year had escaped assessment by reason of the assessee's failure to disclose material facts, and stated that he had produced all books of account, bank statements and other necessary documents in connection with his return. This writ petition came befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner's sanction is solicited to reopen the assessment for 1958-59 under section 147(a). " It may be seen from the extract of the report that the Income-tax Officer had not even expressed any prima facie view that the assessee's income had escaped assessment because the respective persons had not really lent moneys to the assessees but had only lent their names. The learned counsel for the assessee drew our attention also to an earlier decision of the Supreme Court in Chhugamal Rajbal v. S. P. Chaliha [1971] 79 ITR 603. For the assessment year 1960-61, the assessee in that case had produced its books of accounts and statements giving full names and addresses of the various creditors from whom moneys had been borrowed. The assessment was completed. Thereafter, the Income-tax Officer issued a notice under section 148 of the Act for initiating reassessment proceedings. The assessee filed a writ petition in the High Court challenging the validity of that notice on the ground that the requirements of section 151(2) were not complied with. The writ petition was dismissed by the High Court. On appeal, the Supreme Court directed the department to produce the records to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers, viz., (1) Seth Tulsidas Lalchand-Rs. 10,000, (2) Seth Naraindas Jethanand-Rs.10,000, (3) Seth Khubchand Vashumal-Rs. 10,000, (4) Seth Hariram Tiloomal-Rs. 10,000 and (5) Seth Ramchand and Sons- Rs. 10,000. There is information to show that these bankers have been found to have indulged in hawala business. These loan transactions which the assessee claims to have had with the above mentioned five bankers are not genuine and to that extent there has been concealment of income. I have reason to believe that there has been an escapement of income to the extent of Rs. 50,000 for the assessment year 1958-59. Permission is requested for reopening the assessment under section 147(a) for the assessment year 1958-59. " From these two reports it is clear that the Income-tax Officer had prima facie come to the conclusion with reference to these assessment years that the income had escaped assessment to the extent mentioned in the said reports. Therefore, the facts here are different from those which came to be considered by the Supreme Court in the two decisions mentioned above. The finding on the facts here that there was no disclosure of the material facts at the stage of the origina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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