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TMI Blog1984 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been paid to the same party, viz., Southern Engineers, Bombay. The ITO found that the version of the assessee about the said payment was false and that the entries about the said payment were bogus. He, therefore, disallowed the claim. Against the said disallowance, the assessee filed an appeal before the AAC on 12-1-1970. The AAC allowed the claim for deduction of the said amount after reversing the above finding of the ITO. 4. Subsequent to the order of the AAC, the ITO on 27-4-1970 recorded reasons for reopening the assessment for the assessment year 1960-61 in the following words: "The assessee-company claimed Rs. 1,67,062 as expenses incurred towards repairs of cinema building. Similar claims of repairs of Rs. 86,400 was made in the next assessment, i.e., for the year 1961-62. On detailed examination of the claim, it was found that in reality no repairs to the cinema building were made but they were only bogus expenditures claimed by obtaining bill from the contractor Shri T.V. Vijayan, proprietor of Southern Engineers. As the assessee failed to disclose the true and correct nature of repairs expenses at the time of original assessment. I have reason to believe tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ITO, which formed the basis of reopening, the finding of the ITO in the assessment order for the assessment year 1961-62 to the effect that no expenses had been incurred in repairs and renovation, had already been quashed by the AAC (vide order dated 12-1-1970) with the result that the ITO could not have reason to believe that those expenses had not been incurred. Mere fact that the order of the AAC was reversed by the Tribunal subsequently would not make any difference as far as the validity of the reopening was concerned. Reliance was placed on certain decisions to which we shall refer presently. 8. We have considered the rival submissions and facts on record. It is necessary to consider at the outset as to what facts were disclosed at the time of original assessment. The assessee had filed the copies of the accounts. He had disclosed that the amount in question had been spent on repairs and renovation. The name of the persons to whom the amount had been paid was duly disclosed. On 16-1-1962, the ITO, by an order, written in the order sheet, had called upon the assessee to produce the details of the repairs. The order sheet dated 22-1-1962, refers that the assessee furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts, and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable...." These observations were quoted with approval by the Supreme Court in CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609. In that case, the assessee had claimed in the assessment year 1949-50 that the had paid half the profit to one R under an agreement. This fact was accepted in the original assessment and deduction was duly given. In the assessment for the assessment year 1950-51 the assessee again claimed similar deduction for payment of half profit of a joint venture to said R under the same agreement. However, this time, the ITO found that the said agreement was a got-up device to reduce profits and disallowed the deduction and this disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was observed that it was for the ITO to investigate the claim made by the assessee and find out whether the amount was actually spent for the purposes of the assessee's business in order to qualify for allowance. It was no duty of the assessee to disclose at the same time that deduction was not permissible. Consequently, mere fact that the ITO received subsequent information to the contrary would not justify reopening under section 34(1)(a). 11. The ratio of these decisions applies to the facts of the present case. In this case, the assessee had disclosed all primary facts. They were duly investigated by the ITO. The ITO was satisfied about the truth of those facts. In these circumstances, mere fact that a contrary finding was recorded in the assessment for the subsequent assessment year would not justify reopening of the assessment of the earlier year under section 147(a). In this view of the matter, the reopening must be held to be bad in law. 12. The decision in S.P. Mohan Singh's case, which has been relied on by the department is distinguishable because in that case the return had been accepted without making enquiries into genuineness of the cash credits and no evide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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