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TMI Blog1994 (9) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal assessment in this case for the assessment year 1979-80 was completed under section 143(3) on 16-3-1982 and the total income was determined at Rs. 802 against the loss of Rs. 1780 declared by the assessee in the return filed on 3-12-1979. Subsequently the assessment was reopened by issue of notice under section 148 dated 10-3-1986 and in response to that notice the assessee filed a return on 25-4-1986 declaring total income of Rs. 4,670. The reassessment was completed on 26-3-1990 under section 143(3)/147 determining the total income at Rs. 2,52,261 including income of Rs. 2,20,000 from undisclosed sources. This re-assessment is under appeal. 3. The addition of Rs. 2,20,000 as income from undisclosed sources was made on account of unexplained loans obtained from the following parties : (i) Sri Prabhu Dayal Agarwala Rs. 1,20,000 (ii) M/s. Dibang Valley Timber Trade (P.) Ltd. Rs. 1,00,000 ---------------------- Rs. 2,20,000 ---------------------- The Assessing Officer (in short 'AO') found that the assessee has received a loan of Rs. 1,20,000 from Sri P. D. Agarwal of Tinsukia, Assam on an interest rate of 12% and has deposited the same in the firm M/s. Sudersha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditworthiness as well as genuineness of the loan transaction are well established. Before coming to the conclusion he verified the confirmation certificates, relevant cash book, bank certificate, capital accounts and other documentary evidence. He also agreed with the contention of the assessee that the assessee had fully discharged its onus of proving the genuineness of the loan. According to the CIT(A) merely because the creditors who are stationed at a distant place could not appear before the AO at Calcutta is no reason to consider the loan as not genuine. According to the CIT(A) enough documentary evidence and material have been produced and furnished by the assessee to establish the identity, creditworthiness and genuineness of the loan transactions and there was no reason for disallowing the same. Accordingly he deleted the addition of Rs. 2,20,000 and directed the AO to allow deduction of interest payable at Rs. 20,703. 7. Being aggrieved by the order of the CIT(A) the revenue has preferred this appeal to the Tribunal. The learned departmental representative (in short 'DR') strongly relied on the order of the AO and vehemently supported the stand taken by him. He opposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 147 is absolutely wrong. To support his argument and contention, he placed reliance on the following decisions : (i) Panchanan Hati v. CIT [1978] 115 ITR 336 (Cal.) ; (ii) ITO v. A. R. (P.) Ltd. [1980] 125 ITR 177 (Cal.) ; (iii) Rungta Sons (P.) Ltd. v. ITO [1980] 125 ITR 708 (Cal.) ; (iv) S. P. Agarwalla v. ITO [1983] 140 ITR 1010 (Cal.). 9. We have heard the parties at length and have carefully considered the rival contentions, relevant facts and material placed on the record. We have also gone through the High Court's decisions on which reliance has been placed by the learned counsel for the assessee. We find that the assessee has filed confirmatory letters from both the creditors, copies of balance-sheets of both the creditors, copy of extracts from the cash book of M/s. Dibang Valley Timber Trade Pvt. Ltd., copy of certificate from Indian Bank regarding investment of Rs. 1,00,000 in fixed deposit, copy of account of M/s. Sudershan Plywood Ind. for repayment of loans of M/s. Dibang Valley Timber Trade P. Ltd. etc. to prove the identity and creditworthiness of the creditors and genuineness of the loan transactions. The CIT(A) has verified the contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised his powers under section 131 properly and legally in summoning the creditors who were stationed at a far-flung place of hilly area situated beyond more than 500 Km. It was only to observe the formality that the summonses were issued and the request of the assessee for time was refused. This is against the principles of natural justice. 11. In order to bring important facts to close focus it is pertinent to know that in the original assessment order passed under section 143(3) on 16-3-1983 confirmatory letters filed by the assessee were accepted subject to verification by the AO, as it is evident from the assessment order dated 16-3-1982, which is a part of record. It is also noticed that subsequently assessment was reopened under section 147 on 10-3-1986 by issue of notice under section 48 and the return was filed on 25-4-1986 and reassessment was completed on 26-3-1990. Thus, we find that more than eight years have elapsed and the AO could not complete the verification of loans by conducting necessary enquiry and investigation, for the reasons best known to him. On the other hand, he has chosen to complete the job at the fag end of the year and that too by refusing the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry and investigations at that time. Since the AO failed to do so in our view he could not have taken recourse to section 147 and issued notice under section 148 of the Act. Once the AO has taken a stand and accepted the loans as genuine ones he cannot change the stand in the absence of positive material and evidence, go back and reopen the assessment. 14. All the four Calcutta High Court decisions on which the reliance is placed help the case of the assessee and support our view. In the case of S. P. Agarwalla it was held by the Calcutta High Court that in the absence of a direct nexus or live link such confessional statement would not constitute the relevant material justifying the reopening of assessment. Therefore, reassessment notice, was liable to be quashed. In this case also confirmatory letter from the lender was filed and was accepted as genuine in original assessment but subsequently on confession by the lender the assessment was re-opened although confessional statement did not refer to the name of the assessee. In that case it was further held that it was the duty of the AO to investigate the genuineness of the transaction of the loan before accepting the same. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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