9911796707
TMI Blog1974 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... showed a cash credit of Rs. 30,000 on February 2, 1957 The assessee claimed that it was a loan from one Janhabi Charan Roy. He produced an affidavit of the creditor and later the creditor also appeared before the Income-tax Officer to support the loan transaction. The Income-tax Officer, however, was not satisfied that the amount of Rs. 30,000 entered in the books of account on February 2, 1957, represented a transaction of loan. The amount was accordingly added as income from a concealed source. The addition was upheld by the Appellate Assistant Commissioner, but the Appellate Tribunal deleted the amount by saying : " In this case the assessee has discharged the initial onus on him by producing the alleged creditor before the Income-tax Officer for examination who had supported the version of the assessee. Both the Income-tax Officer and the Appellate Assistant Commissioner have held that the amount is really the assessee's concealed income by refusing to believe the evidence of the creditor without, in any way, trying to disprove the truth of the statements made by him. In this case, the creditor, Janhabi Charan Roy, has stated on solemn affirmation before the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs. 30,000 by holding that it was not an unexplained cash credit but a loan, and directed that the peak cash credit of Rs. 51,031 should be taken as an addition. On the assessee's further appeal to the Tribunal, it came to hold that the Income-tax Officer had made the assessment under section 147(b) of the Act and the same was barred by limitation. The issue of the notice as well as the reassessment were not saved by Explanation 2 of section 153(3) of the Act. On a reading of the appellate order of the Tribunal for the assessment year 1958-59 it is clear that the Tribunal came to hold that the sum of Rs. 30,000 which found place in the books of account of the assessee on February 2, 1957, as a loan from Janhabi Charan Roy had been sufficiently established to be a loan and the revenue had no justification to treat it as an unexplained cash credit. On this finding deletion of the amount was directed. The subsequent statement contained in para. 4 of the appellate order, in our view, is not a finding. It was intended to show the fallacy in the contention of the Income-tax Officer, namely, if it was really an unexplained cash credit which could be treated as income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more, for that year ; (b) in cases falling under clause (b) of section 147, at any time after the expiry of four years from the end of the relevant assessment year. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151 ...... 150. Provision joy cases where assessment is in pursuance of an order on appeal, etc.--(1) Notwithstaning anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order ........" The learned counsel for the revenue claimed the benefit of Explanation 2 of section 153 of the Act. We have already indicated that the finding of the Tribunal for the assessment year 1958-59, was categorical that the amount of Rs. 30,000 appearing in the assessee's books of account on February 2, 1957, represented a genuine loan and not an unexplained cash credit. In view of such a clear finding, benefit of Explanation 2 of section 153 of the Act is not available to the revenue. The Tribunal in our opinion, came to the right conclusion when it refused to accept such a contention raised by the revenue before it. Law is settled that the Income-tax Officer for the purpose of initiating action under section 147 of the Act must have reason to believe that income chargeable to tax has escaped assessment. If this escapement is by reason of omission or failure on the part of the assessee to make a return under section 139 of the Act or to disclose fully and truly all material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the issue of a notice under section 148. To question No. 8 in the report which reads : ' Whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148', he just noted the word ' Yes' and affixed his signature thereunder. We are of the opinion that if only he had read the report carefully he could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. The important safeguards provided in sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. They have substituted the form for the substance." In Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax the Supreme Court reiterated the aforesaid view and stated : " In our judgment, the law laid down by this court in the above case (Chhugamal Rajpal v. S. P. Chaliha is fully applicable to the facts of the present case. There can be no manner of doubt that the words ' reason to believe ' suggest that the belief must be that of an honest and reasonable person based up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of such an opinion he will not have jurisdiction to initiate proceedings under section 34(1)(a) (of the 1922 Act corresponding to section 147(a) of the 1961 Act). The fulfilment of this condition is not a mere formality but it is mandatory. The failure to fulfil that condition would vitiate the entire proceedings. As held by this court in Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax, the Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied, does not exist or is not material or relevant to the belief required by this section. It is true that the courts will not go into the sufficiency of the reasons which persuaded the Income-tax Officer to initiate proceedings under section 34(1)(a) of the Act but the courts will examine the relevancy of the reasons which persuaded the-Income-tax Officer to take proceedings under section 34(1)(a). The formation of the required belief is not the only requirement. The Income-tax Officer is further required by section 34 to record his reasons for taking action under section 34(1)(a) and obtain the sanction of the Central Board of Revenue or the Commissioner, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under the section." To the appeal before the Tribunal for the assessment year 1958-59, the Income-tax Officer was a party. The Tribunal's order, as already stated, recorded a categorical finding that Rs. 30,000 appearing in the assessee's books of account on February 2, 1957, was a loan. The impugned notice was issued more than a year after the Tribunal's decision though the Income-tax Officer had taken action to reopen the matter some time in July, 1964. Though the learned standing counsel seriously contended that the appellate decision of the Tribunal was not the basis upon which action under section 147 of the Act was taken, we find the following statement in the order of the Tribunal in the appeal out of which this reference arises : " In the assessment before us for the assessment year 1957-58, an identical amount of Rs. 30,000 is sought to be included and it is common ground that the order of the Appellate Tribunal indicating that the amount could in any event be taxed in the assessment year 1957-58 furnished the basis for reopening the assessment." No objection appears to have been taken to this statement in the appellate order in the application under section 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination against the assessee. The Tribunal has rightly held : " The cash credit in question, according to the books of the assessee, was in the calendar year 1957 which formed the previous year for the purpose of the business for the assessment year 1958-59. The assessee, in our opinion, could have brought to the notice of the Income-tax Officer this cash credit only in the course of the assessment proceedings for the assessment year 1958-59 and in fact the cash credit was noticed by the Income-tax Officer who treated it as income of that year. It could not, therefore, in our opinion, be said that the assessee deliberately or wilfully failed to furnish the details of the cash credit in connection with the assessment for the assessment year 1957-58." Clause (a) of section 147 of the Act had, therefore, no application. It is in that view of the matter that the Tribunal proceeded to examine whether the reopening could be under clause (b) of section 147 of the Act. The notice for reopening has been given in this case beyond four years. Therefore, the question as to whether action has been taken under clause (a) or clause (b) becomes material. Under section 149(1) the limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to disclose a material fact when the assessee shows either that such a material fact did not exist or that he had in fact disclosed such a fact ? In either of these two cases, it would seem that the court can investigate and come to the conclusion that the Income-tax Officer had no reason to believe and could not have any reason to believe that the assessee had failed to file his return or had failed to disclose a material fact necessary for his assessment. In such a case, the fact whether the return was filed or not or the fact of the existence or not of a thing not disclosed or objective facts and cannot depend on the reasonable belief of the taxing officer. If it was otherwise, an Income-tax Officer can initiate proceedings by merely saying that he had reason to believe that the assessee had omitted or failed to file his return or had omitted or failed to disclose a material fact though in one case the assessee had in fact filed his return and in the other case he had in fact disclosed all material facts or the fact which the Income-tax Officer says was not disclosed, did not in fact exist. The existence of a primary fact is therefore an objective fact which the court can inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should strictly fall within that provision and it is for the department to show that the necessary conditions for the exercise of jurisdiction are fully present. The department is not at liberty to take hold of any and every circumstance, call it non-disclosure of material facts and set the machinery of reassessment in motion. If this were to be permitted there is every danger of this provision of law being used as an instrument of oppression against the assessee. The true position is that if the Income-tax Officer was left in the dark in respect of basic and crucial facts relevant to the assessment, he has jurisdiction to reopen the assessment and pass orders of reassessment." Dealing with clause (b) the Gujarat High Court proceded to say : " Under clause (b) the requirement is a reasonable belief on the part of the taxing officer that there was non-assessment, under-assessment, etc., in consequence of some information that comes in his possession. In a case falling under clause (b), though the question whether the officer had reason to believe may not be a question into which the court can go in exercise of its jurisdiction under section 66 of the Act, yet it would be open ..... X X X X Extracts X X X X X X X X Extracts X X X X
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