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TMI Blog2005 (11) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for that year or to make a return u/s 139 for the assessment year to the Assessing Officer. Both the conditions should be cumulatively satisfied to confer jurisdiction to the Assessing Officer to initiate the proceedings. So long as the disclosure made by the assessee is full and true of all the material facts, the intention of the assessee cannot be questioned. If however, the subsequent events, after completion of the assessment, belie the claim of the assessee made at the assessment stage, it cannot be said that the disclosure earlier made was full and true. On consideration of the facts, we are of the view that Assessing Officer did not validly assumed jurisdiction in initiating proceedings u/s 147 of the Income-tax Act. Considering the discussion and relying on earlier order of ITAT Amritsar Special Bench in case of Assam Tea Co.[ 2004 (1) TMI 296 - ITAT AMRITSAR] , we are of the view that cases of assessees are squarely covered by order of Special Bench in case of Assam Tea Co. therefore, initiation of the reassessment proceedings are not in accordance with law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round has been taken in the grounds of appeal. Learned counsel for the assessee submitted that the additional ground so raised is legal in nature which was taken before the authorities below. Learned counsel for the assessee further submitted that since the issue raised in the additional ground arises from the order of the authorities below and a reference is also made to the Special Bench on the same issue, therefore, the same may be admitted for hearing. Learned DR, however, opposed the request of learned counsel for the assessee and submitted that section 148 is meant for the Department and it is the fundamental duty to unearth the undisclosed income. Therefore, Department should not be stopped midway from making the investigation. He, accordingly, submitted that additional ground may not be admitted. 5. On consideration of the above facts, we are of the view that the additional ground raised in four appeals is legal in nature which was also agitated before the DCIT(A) and no fresh investigation on facts is required, in case the additional ground is admitted. Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 held:- Undoubtedly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided under the law. The legality of the initiation of reassessment proceedings were also objected to on the plea that subsequent information to the Assessing Officer that money lenders were not genuine did not justify the reassessment proceedings. However, the contention of the assessee did not find favour with the Assessing Officer. The Assessing Officer also called upon the assessee to prove the genuineness of the loan transaction and in response thereto, the assessee filed confirmation letter. However, the creditor was not produced. On these facts, the Assessing Officer was of the view that cash credit is not genuine. The Assessing Officer also pointed out that the enquiries made by the Department have revealed that Shri Parshotam Dass and his associate concerns namely Ram Kumar Parshotam Dass, Jai Shankar Karyana Traders Yogesh Kumar S/o Shri Parshotam Dass and Smt. Savitri Devi, W/o Sh. Purushotam Dass were engaged in the business of name lending on a vast scale. The Assessing Officer, accordingly, rejected the contention and made the addition in both the assessment years. The assessment order was challenged before the DCIT(A). Same submissions were made before DCIT(A). How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of ITAT Amritsar Bench (Special Bench) in the case of Assam Tea Co. Learned counsel for the assessee also relied upon the decision of Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. 9. On the other hand, learned DR submitted that the assessee in his written submission admitted that the notice under section 147 is valid but assessment is not valid. Learned DR further reiterated that section 148 is meant for the Department to unearth, undisclosed and escaped income. Therefore, it was the fundamental duty of the Revenue Department to proceed under section 147 in order to achieve the intent and purpose of the Act. He has further submitted that the Revenue Department should not be stopped from investigation of the case by quashing the initiation of the proceedings under section 147 of the Income-tax Act. Learned DR relied upon the order of ITAT Amritsar Bench (Third Member) decision in the case of Gopi Chand Prem Kumar v. ITO [2001] 71 TTJ 627 and decision of Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 and order of ITAT Amritsar Bench in the case of Asstt. CIT v. Sachdeva Sons [2005] 97 ITD 425 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) and (b). In the present appeals,, we are concerned with the unamended provisions. Relevant portion of clause (a) of section 147, empowers the Assessing Officer to assess or reassess any income, where he has reason to believe that by reason of the omission or failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, any income chargeable to tax has escaped assessment. It shows that the proceedings under section 147(a) read with section 148 can be initiated of two conditions are satisfied, namely, (i) the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for that year, or to make a return under section 139 for the assessment year to the Assessing Officer. Both the conditions should be cumulatively satisfied to confer jurisdiction with the Assessing Officer to initiate the proceedings. The key words used in this clause are to disclose fully and truly all material facts . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9] 177 ITR 477 (Punj. Har.), the Income-tax Officer found in the account books of -the assessee that firm 'G' had advanced a sum of Rs. 20,000 to the assessee by way of cash credit. At the time of original assessment, it did not come to light whether 'G' had really advanced by way of cash credit or was merely a bogus firm lending its name. Later on when the assessment proceedings were initiated against 'G', it transpired that it had indulged in Hawala business with various parties including the assessee and that firm merely lent its name to the assessee and no amount was in fact advanced. In this case, the Tribunal found that the ITO had reason to believe on the basis of subsequent information that the assessee had earlier failed to disclose the material facts and hence the reassessment proceedings were held to be valid. It was held by the Hon'ble High Court that the Tribunal was right in holding that the action under section 147(a) of the Act was rightly taken by the ITO against the assessee. 6.3 In the case of Kirpa Ram Ramji Dass v. ITO [1982] 135 ITR 68 (Punj. Har.), the assessee had shown a sum of Rs. 95,000 as having been borrowed from five persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee; other not. 6.5 In the case of Phool Chand Bajrang Lal, the assessee had claimed that it had borrowed a sum of Rs. 50,000 from a Calcutta Company. Such loan was stated to have been raised and returned in cash though interest on such loan was paid by cheque/bank draft. During the assessment proceedings, the ITO finalized the return by allowing deduction of such interest. Thereafter, he entertained some doubts about the genuineness of the loan transaction. An inquiry horn his counterpart at Calcutta revealed that the Calcutta Company had not advanced any loans to any person. The ITO of the assessee examined the Managing Director of the Calcutta Company who admitted that he had made a confession to the ITO at Calcutta, that the Company had not advanced any loan to any person. It was on the basis of these facts that the Hon'ble Summit Court held that the initiation of re-assessment proceedings as valid. 6.6 The legal principles, relevant to the issue in question, that can be culled from the survey of the aforesaid Apex Court and the jurisdictional High Court decisions can be summed up as under: (a) In general, if the events subsequent to the completion of the assessment sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that she did not know these persons nor any transaction was made with them. On an examination of her preliminary and concluding statements, it becomes abundantly clear that no question was asked regarding financial transactions of her husband with any party. Nothing was placed on record by the Revenue to show that the search unearthed any specific incriminating material casting doubt over the genuineness of the transactions of M/s. RKP with these assessees. No statement, much less the confessional statement of Sh. Parshotam Dass, was recorded at any stage that could show that he had lent his name or of his associated concerns to the assessees in question. The department swing into action by initiating the reassessment proceedings only on the basis of all the entries in the books of account of Sh. Parshotam Dass and his allied concerns, without establishing any clear-cut connection of name lending by Sh. Parshotam Dass with the assessees in question. It is pertinent to note that M/s. RKPD was a partnership firm. Neither statement of Sh. Parshotam Dass nor that of any other partner of the said firm was recorded which could justify the initiation of reassessment proceedings. It is tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 989 and was served upon the assessee on 31st March, 1989 i.e. prior to the amendment in section 147 of the Income-tax Act. Section 147 of the Income-tax Act prior to the substitution by Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989, stood as under:- If- (a) the Assessing 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 Assessing 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, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 and 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income-tax Officer is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression reason 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 purpose of the section. To this limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Durga Prashad Goyal in which the Assessing Officer has referred to the search conducted at the residence of Shri Purshotam Dass mentioned above and further mentioned that the assessee has not filed income tax return for the assessment years 1982-83 and 1983-84. He, therefore, on such facts stated to have reasons to believe that by reasons of omission for failure on part of the assessee to make a return under section 139 for both the assessment years, the income chargeable to tax as escaped assessment of these years. Copy of ITNS -10 is also filed in which in column No. 8 it is stated by the Assessing Officer that assessment is proposed to be framed for the first time. These facts clearly show that Assessing Officer was not justified in reopening the assessment in the matter because he has recorded facts contrary to record in the assessment order, Assessing Officer mentioned that original assessment for both the years were made under section 143(1) vide orders dated 30-6-1988 and 30-11-1983 respectively which show returns are in fact filed. The reasons recorded by the Assessing Officer for forming his belief for reopening assessment under section 147 are not based on any mate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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