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TMI Blog2001 (3) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged the merits also, which formed the basis of the re-opening of the assessment originally. 3. Considering the peculiar facts involved reasons for issuing of notice under section 148 of the Act for re-assessment are first reproduced in their entirety, a copy of which is given to us at page 38 of the paper book :--- "Reasons for issue of notice u/s 148.-A search was conducted at the residence of Shri Parshotam Dass resident of Saraswati Model School, Jaitu on 31-1-1989 as also at the business premises of the associated concerns of this person under section 132 of the Income-tax Act, 1961. A large number of incriminating documents as well as books of account were found and seized during the course of search, it was gathered that certain parties of Moga had introduced their own money in their books of account in the names of Shri Parshotam Dass, his family members and other associated concerns. I have information in my possession that M/s. Gopi Chand Prem Kumar, Moga have introduced following bogus cash credits during the relevant account period in the names of the above-mentioned persons/concerns as under : M/s. Ram Kumar Parshotam Dass, Jaitu Rs. 1,40,000. I have, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the a/c of Ram Kumar Parshotam Dass Jaitu :--- 1st Period ----------------- 14-4-80 40,000 5-5-80 20,000 31-10-80 40,000 2ndPeriod ----------------- 30-1-81 40,000 It has been pointed out to the assessee that M/s. Rain Kumar Parshotam Dass is known name lender and that search conducted at the business premises of the creditors and residential houses of its associates have revealed that they are not men of means. Assessee is given another opportunity to prove genuineness of the creditors. Case is adjd. to 28-2-90. 28-2-90 Present Shri P.P. Kansal, Advocate. Request for another date. Adjd. to 16-3-90. 16-3-90 Present Shri P.P. Kansal, Advocate. Written explanation filed. Assessee to deposit diet money for calling the creditors. Case adjd. to 23-3-90. 23-3-90 Present Shri P.P. Kansal, Advocate. The address of the creditor has been furnished as Under :--- M/s. Ram Kumar Parshotam Dass, Jaitu, Distt. Faridkot. Assessee to deposit diet money of Rs. 50 so that summons be issued and case is adjd. to 26-3-90. 26-3-90. Present Shri Prem Kumar partner with Shri P.P. Kansal, diet money not deposited nor creditor has been produced. Assessee states that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved and repaid through a Hundi Broker, namely, Shri Bhagwan Dass Goyal of Moga and further that the amounts had been received and repaid through account-payees cheques and that the creditors were well-known. Since it has been brought on record that M/s. Ram Kumar Parshotam Dass, Jaitu had its bank accounts and huge credit balances in several Bank accounts the relevant parts of the communication are reproduced as follows : "To The Income-tax Officer, Ward-2, Moga. Sub. :- Re-assessment proceedings in case of M/s. Gopi Chand Prem Kumar, Moga Asstt. years 1981-82 to 1985-86. Dear Sir, At the time of last hearing, your honour had asked the assessee to produce the creditor namely M/s. Ram Kumar Parshotam Dass of Jaitu. In this connection, your honour's kind attention is invited to the following facts :--- 1. That the creditor was a regular income-tax assessee with the Income-tax Officer, C-Ward, Bhatinda. 2. That the amount was received and repaid through hundi broker namely Sh. Bhagwan Dass Goyal, resident of Mohalla Vidya Rattan Goel Moga. 3. That the amount was received and repaid through payees account cheques issued by the creditor. 4. That the hundi co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext, Shri Sud referred to the authorities, which had been cited before the Assessing Officer and the CIT(A) and in addition filed a copy of the judgment of the Hon'ble Allahabad High Court in the case of Raj Kishore Prasad v. ITO [1990] 88 CTR (All.), 152, judgment dated 2-5-1990. This judgment, Shri Sud relied after bringing to our notice the factual aspect that the ITO, Ward-I Moga had recorded reasons on 28-3-1989 and the Commissioner of Income-tax, Jalandhar, under the rubber stamps had signed without making his comments much less there being any indication that he had applied his mind. In the Allahabad High Court case there were more than one issues involved but we are bringing in close focus by reproducing only that part of the judgment which dealt with section 151 of the Act which requires sanction of the CIT before issue of notice under section 147(a) of the Act. The said decision is contained in paras 7 8 of the judgment dated 2-5-1990 of the Allahabad High Court :--- "7. In view of section 151, there was required sanction of the CIT before issue of the impugned notice under section 148 of the Act for purpose of reassessment under section 147. In the instant case the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and that too in order to bring to tax certain alleged bogus credit the onus shifts to the Revenue. In that case, the assessee had raised credits from some parties on the basis of Hundies, amounting to Rs. 95,000. The ITO had examined the entries in the books of account and also the Khokas and he had accepted the credits as genuine. After the assessments were completed, the ITO had felt misgiving about his earlier findings and issued notice under section 148 of the Act. The assessee complying with the re-assessment notices filed returns declaring original income. The ITO once again looked into the discharged Hundi, the bank account whether amounts were credited and whether the payments were made, After examining such details he dropped the proceedings by communication dated 14-12-1962. After country-wide rates of bankers, who were indulging in making bogus entries in their books and after certain persons had made sweeping admissions and lists were issued, the ITO once again felt that the credits appearing in the assessee's books had not been correctly appreciated, and resorted to reassessment proceedings once again under section 147 of the Act by issue of notice, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation from M/s. Ram Kumar Parshotam Dass regarding advancing of loans of Rs. 1,40,000 was furnished in the original assessment proceedings. Another factor, independently of the above which is considered important but has not been appreciated is that even as on 30-3-1985 there were credit balance of Rs. 58,920 in the assessee's books in the account of M/s. Ram Kumar Parshotam Dass. If such credit has been accepted as genuine, we fail to see any justification for treating transactions made as early as in the financial year 1-4-1980 to 31-3-1981 as not genuine on the given facts of the case. 17. We are tempted to reproduce a portion of last but one paragraph from the judgment of the Hon'ble Supreme Court in the case of Mewalal Dwarka Prasad because of the similarity of facts prevailing in that case as also in the case before us :--- "The Income-tax Officer accepted the documents produced and treated all the three transactions to be genuine and on that footing completed the assessment. The primary facts were before the Income-tax Officer at the time of the regular assessment and he called upon the assessee to explain to his satisfaction that the entries were genuine and on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dictional Punjab and Haryana High Court in the case of Jai Singh. 19. We, however, rely on the order of the Calcutta Bench 'D' in the case of Smt. Chanda Devi . Saral v. ITO [1990] 32 ITD 518, judgment dated 26-12-1988 in which on the basis of decisions in the cases of Govinda Choudhury Sons v. ITO [1977] 109 ITR 370 (Ori.), Chanchal Kumar Chatterjee v. ITO[1974]93 ITR 130 (Cal.) and Supreme Court decisions in the cases of Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 and CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609, where approval was given by means of a rubber stamp only above the signature of the officer concerned, it came to be held there was no valid sanction of the CBDT as laid down in section 151(1) of the Act and so the consequent initiation of the proceedings by the ITO were invalid. 20. For the Revenue, Shri Raj Kumar, D.R. very energetically and emphatically relied on the order of the CIT(A) and since he further submitted that in the re-assessment which followed some other additions were also made besides the one on the basis of which notices were issued under section 148 of the Act, we must refer to the judgment dated 24-4-1989 in the case of CIT v. Atlas Cyc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice was a notice issued under that sub-section.... 149. Time limit for notice.---(1) No notice under section 148 shall be issued,--- (a) in cases failing under clause (a) of section 147--- (i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub clause (ii).... (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." From the plain phraseology of the above sections of the Act, it appears that two conditions precedent which are required to be satisfied before an Income-tax Officer can acquire jurisdiction to proceed under clause (a) of section 147 read with sections 148 and 149 of the Act, beyond the period of four years but within the period of eight years from the end of the relevant year are : (a) that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or had escaped assessment and (b) that the Income-tax Officer must have reason to believe that such escapement or under-assessment was occasioned by reason of omission or fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts where the primary deposits were more than a few lakhs of rupees :--- -------------------------------------------------------------------------------------------------------------------------------------------------- Name of the person Name of the Bank Primary deposits and account number and A/c No. -------------------------------------------------------------------------------------------------------------------------------------------------- M/s. Jaishankar State Bank of Kiryana Traders Patiala, Jaitu Rs. 3,35,000 -do- Bank of India, Moga Rs. 14,00,000 -do- Central Bank of India, Moga Rs. 1,00,000 -do- Central Bank of India, Jaitu Rs. 17,00,000 Similarly M/s. Ram Kumar Parshotam Dass had given loans to following parties (while its proprietor, as already stated above is almost a pauper) :--- M/s. Ram Kumar Bank of India, Purshotam Dass Moga Rs. 18,25,000 -do- Punjab National Bank, Jaitu Rs. 8,00,000 -do- Central Bank of India, Moga Rs. 3,12,000 -do- Union Bank of India, Moga Rs. 11,50,000 Sh. Parshotam Dass Bank of India, Moga Rs. 5,00,000 Smt. Savitri Devi Rs. 5,00,000 w/o Parshotam Dass -do- Smt. Savitri Devi Punjab National w/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 Cash book for 31-3-86 not closed. (iii) Cash Book Sr. No. 12 from 1-4-85 onwards from 10-11-86 onwards O.B. of cash and closing balance not struck And space kept for entries. (iv) Cash Book Sr. No. 10 (1-4-86 to 28-1-87) from 10-10-86 onwards. O. Balance and closing balances not struck. Space kept for desired entries. (v) Cash Book Sr. No. 17 from 1-4-86 to 13-11-86 from 1-4-86 to 15-11-86. O. Balance and C. Balance not struck. Space kept blank for desired entries. (vi) Cash Book Sr. No. 16 from 10-10-86 to 1-1-87. Entries from 8-1-87 not closed. From the above discussions it is apparent that, (Sh. Parshotam Dass was part-time accountant and runs a petty kiryana shop under the name and style of M/s. Ram Kumar Parshotam Dass, Jaitu. In his petty shop there was not even a single chair and survey party had to carry out the survey operation standing.) Sh. Parshotam Dass and his associate concerns did not have the capacity to give such huge amounts of loans to other parties and they were giving only accommodation entries to facilitate the evasion of taxes by various parties who were introducing their own money in the garb of cheques issued by Sh. Parshotam Dass or his assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd since the creditor was not an actual money lender but was only a name tender, the Assessing Officer at Moga, having jurisdiction over the case of the assessee, prima facie formed the belief that the assessee had not stated the primary facts regarding the loan transaction 'fully and truly' during the original assessment proceedings. It was under these circumstances that the assessment was sought to be reopened and notice under section 148 of the Act, after obtaining the requisite permission of Commissioner of Income-tax, was issued. 28. The assessee challenged the reopening of the assessment on the plea that since the primary facts were before the ITO at the time of original assessment, the reopening could be resorted to only under clause (b) of section 147 and not under clause (a) of section 147. Reliance was placed on the decision of Hon'ble Supreme Court in the case of Mewalal Dwarka Prasad as well as the decision of the Hon'ble Punjab and Haryana High Court in the case of Shiv Lal Kanhaya Lal. 28.1 The Assessing Officer rightly held that the facts of the case of the assessee are distinguishable from the facts of both these cases as in both of these cases the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not genuine. A few other High Courts have taken a contrary view on the above question. The aforesaid question is, in our opinion, a substantial question of law of general importance which needs to be decided by the Supreme Court." 28.3 Appeal in the above case has since been decided by the Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 wherein the reasoning and conclusion of Hon'ble Allahabad High Court has been upheld by the Hon'ble Supreme Court after referring to the various judicial decisions, including the decision of Hon'ble Supreme Court in the case of Chhugamal Rajpal as well ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 as also the decision in the case of CIT v. T.S.P.L.P. Chidambaram Chhettiar [1971] 80 ITR 467. The Hon'ble Supreme Court at page 478 of the above referred decision specifically negatived the arguments of Sh. G.C. Sharma, Learned Sr. Counsel for the assessee in the following words : "We are not persuaded to accept the argument of Mr. Sharma that the question regarding the truthfulness or falsehood of the transaction reflected in the return can only be examined during the original assessment proceedings and not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as void ab initio is because of the fact that approval of the CIT granting permission to initiate the proceedings under section 147(a) was granted by way of affixing a Rubber Stamp over the proposal sent by the Assessing Officer to the effect that "yes, it is a fit case". Sd. 30-3-89 Commissioner of Income-tax, Jalandhar." From the above, my Ld. Sr. Colleague concluded that approval has been granted by the CIT in a mechanical manner without application of mind and for that purpose reliance was placed on the decision of Hon'ble Allahabad High Court in the case of Raj Kishore Prasad and relevant portion of that judgment has been reproduced/extracted at page 8 of the proposed order. 32.1 A perusal of the above portion of the order as well as the judgment clearly indicates that the above decision was given on the peculiar facts of that case and that too on a writ petition filed by the assessee. A perusal of the operative part of the judgment, which has been extracted at page 8 of the proposed order of my Ld. Sr. Colleague, clearly indicates that the respondent Assessing Officer was afforded sufficient opportunity to place relevant papers before the Court to indicate the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court decision in the cases of Chhugamal Rajpal and Burlop Dealers Ltd are distinguishable on facts. 34. In the decision of Govinda Choudhury Sons'case , the findings of the Tribunal was given in a Writ Petition where the sanction of the Commissioner was given by a Rubber Stamp indicating the word 'Yes' and not the words 'Yes, it is a fit case', which is the indication in the present appeal before us. In the above case the respondent did not bring to the notice of the Hon'ble High Court other documents which the Commissioner of Income-tax took into account when he disposed of the question of sanction and accordingly the High Court held that the sanction was granted in a mechanical way. In the above case the findings of the High Court was that the sanction of the CIT was obtained by the Assessing Officer on a false representation of facts and the court was of the opinion that if the CIT had only read the report carefully, he could not have agreed to the conclusion on the material before him that 'It is a fit case to issue notice under section 148. The position in the case of Chhugamal Rajpal is also similar because at page 608 of the report the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 99040.00 Old balance on 5-1-1981 99,040.00 3-2-1981 ---- 0094629/BOI 40,000.00 31-3-1981 240.00 - ----------------------- ---------------------- 240.00 1,39,040.00 ---------------------- ----------------------- Credit balance on 31-3-1981 Rs. 1,38,800.00 1-4-1981 Old Ledger ---- 1,38,800.00 24-4-1981 By Comm. 1,200.00 31-3-1982 10% 1680.00 - ----------------------- ----------------------- 1680.00 1,40,000.00 ----------------------- ----------------------- Credit balance on 31-3-1982 Rs. 1,38,320.00 1-4-1982 Old ledger 1,38,320.00 29-4-1982 By Cash 1,680.00 21-8-1982 80,000.00 ---By UBI 044734 31-3-1983 10% I.T. 982.00 --- ----------------------- ----------------------- 80,982.00 1,40,000.00 ----------------------- ----------------------- Credit balance on 31-3-1983 Rs, 59,018.00 1-4-1983 Old balance -- 59,018.00 4-5-1983 -- 982.00 30-3-1984 10% I.T. 1080.00 - ----------------------- ----------------------- Total 1080.00 60,000.00 ----------------------- ----------------------- Credit balance on 31-3-1984 Rs. 58,920.00 2-4-1984 Old ledger 58,920.00 30-3-1985 - 1,080.00 30-3-1985 10% I.T. 540.00 -- 30-3-1985 10% I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not at all clear and no light was thrown about the nature of these entries during the course of arguments before us. There is no entry with regard to the interest credited in this account, which is claimed to have been paid in cash. However, if the interest was paid in cash, then what was the necessity of taking the cash deposits in the account of the assessee on the dates mentioned above, purpose of which has not been explained to us. 40. While deleting the addition on merits, My Ld. Sr. Colleague at page 11 of the proposed order has observed that as on 30-3-1985, there was a credit in the account of M/s. Ram Kumar Parshotam Dass and if such credit has been accepted as genuine then there was no justification for treating the transactions made as early as in the financial year 1-4-1980 to 31-3-1981 as not genuine on the given facts of the case. 40.1 The above observation of my learned Brother is clearly incorrect as the Assessing Officer has not treated the credit of Rs. 58,920 as on 31-3-1985 in the books of the assessee as genuine and he has reopend the proceedings for the Assessment year 1985-86 as well, which were the subject-matter of appeal before us in ITA Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R Per Shri v. Dongzathang, President -The following point of difference was referred to me under section 255(4) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the proposed order of the Judicial Member holding that the reassessment proceedings were wholly void and bad ab initio and independent of the same on merits also loan transactions with M/s. Ram Kumar Parshotam Dass, Jaitu, could not be held to be non-genuine, is justified, or the approach adopted by the Accountant Member upholding the action of the Assessing Officer in initiating proceedings under section 147(a) of the Income-tax Act, 1961 and restoring the matter back to the Assessing Officer with regard to the genuineness of the loan transactions with M/s. Ram Kumar Parshotam Dass, Jaitu is correct ?" 2. The facts leading to the above order were fully brought on record by the learned Judicial Member who held that the proceedings under section 147(a) initiated by the Assessing Officer were not proper rendering the reassessment wholly void ab initio. The learned Judicial Member also held that on merits also the transactions with M/s. Ram Kumar Parshotam Dass could not be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness or otherwise of the credit introduced by the assessee in the name of Shri Parshotam Dass Prop. of M/s. Ram Kumar Parshotam Dass. Such direction also is quite fair and reasonable as the genuineness of the loan has not been fully enquired into either at the original assessment stage or at the re-assessment stage. I fully concur with the learned Accountant Member on the issue of legal as well as on mert. 6. The matter will now go back to the Division Bench for passing consequential order. ORDER (DIVISION BENCH) Per S. Grover, Judicial Member - These four second appeals are directed against the common order dated 15-1-1991 passed by the Commissioner of Income- tax (Appeals), Jalandhar, hereinafter referred as the CIT(A), in respect of assessment years 1981-82 to 1985-86 for which there were two assessment orders of the ITO, A-Ward, Moga - one in respect of assessment year 1981-82 and a common order in respect of four years with which we are dealing in this order. 2. As far as the assessment years 1982-83, 1983-84 and 1984-85 are concerned, the original assessments were framed as under :--- ----------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his proposed order in ITA No. 293 (ASR)/ 1991 in respect of assessment year 1981-82 the re-assessments for the assessment years 1982-83, 1983-84 and 1984-85 could not be sustained and thereby cancelling the same, and ordering cancellation of re-assessment order for the assessment year 1985-86 on the ground that transactions with M/s. Ram Kumar Parshotam Dass, Jaitu, could not be said to be bogus, is justified, or the approach adopted by the Accountant Member upholding the action of the Assessing Officer in initiating proceedings under section 147(a) of the Income-tax Act, 1961, and restoring the matter back with regard to the genuineness of the loan transactions with M/s. Ram Kumar Parshotam Dass to the file of the Assessing Officer by relying on his dissenting order in ITA No. 293 (ASR)/1991 is correct?" THIRD MEMBER ORDER Per Shri V Dongzathang, President - The following point of difference of opinion was referred to me for decision under section 255(4) of the Income-tax Act : "Whether, on the facts and in the circumstances of the case, the view taken by the Judicial Member that in view of his proposed order in ITA No. 293/ASR/1991 in respect of assessment year 1981-82 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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