9911796707
TMI Blog1983 (12) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... use added as assessee's income Rs. 30,000 and interest on this loan amounting to Rs. 1,087. This assessment was challenged in appeal before the AAC. 3. The AAC vide his order dated 25-9-1974 set aside this assessment with certain directions to the ITO to make it de novo. In pursuant to the directions contained in that order of the AAC the ITO made a de novo assessment on 18-3-1976 and accepted the returned income of the assessee as the total income at Rs. 87,286. In other words, the addition of Rs. 30,000 taken as a loan and the interest thereon originally added were deleted, because that sum of Rs. 30,000 and interest were covered by some voluntary disclosure made by the assessee. 4. One Shri Ram Parshad Aggarwal, partner of Bansi Lal Hans Raj, Laxmi Market, Ludhiana, having their head office at Jalandhar, made a statement on oath before the ITO, Central Circle IV, on 22-6-1976. In this statement the said Ram Parshad Aggarwal referred to his earlier statement made on 19-6-1976 and further deposed that "all money-lending activities recorded in my books of account at the head office and branch office are only name-lending entries and after we stopped maintaining books of account I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return in compliance thereto and the case fixed for hearing on 23-2-1981 was not attended either by the assessee or anyone on his behalf. The total income which was assessed at Rs. 87,286 in the de novo assessment described above was enhanced to Rs. 1,07,886 by adding the credit of Rs. 20,000 which is in dispute and the interest of Rs. 600 on the said amount. This assessment was challenged in appeal before the Commissioner (Appeals). 7. Before the learned Commissioner (Appeals) it was contended on behalf of the assessee, inter alia, on the basis of certain judgments of the Punjab and Haryana High Court mentioned in para 4 of his order that the reassessment proceedings initiated by the ITO were bad in law. Before him, contentions were also raised with regard to the merits of the addition. The Commissioner (Appeals) rejected the assessee regarding the challenge to the legality of the reassessment proceedings. However, coming to the merits of the addition he found that the unexplained amount could only be Rs. 5,250 worked out as under: "Credit in the name of Bharat House, Chaura Bazar, Ludhia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 30,250 Less: Amount disclosed as above 25,000 -------- Balance 5,250 Amount considered in petition dated 27-3-1971 under section 271(4A) for the assessment year 1968-69 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of interest of Rs. 600. In the computation of relief made by him, the assessee got benefit of Rs. 14,750. This decision of his has been accepted by the revenue but the assessee is in appeal before us. 8. The first challenge to the orders of the authorities below is on the legality of the reassessment proceedings as contained in ground Nos. 1 and 2. There is also a challenge on merits in ground No. 3 and the directions issued by the learned Commissioner (Appeals) regarding reopening of the assessment for the year 1967-68 are challenged on the ground of illegality and on the basis that they were uncalled for. 9. The learned counsel for the assessee submitted before us that during the course of original assessment proceedings, the ITO had fully considered the cash credits in the name of Bansi Lal Hans Raj as would be clear from the abstracts of the order sheet entries appearing at pages 1 and 2 of the assessee's paper book. Referring to these abstracts, he pointed out that the ITO at the time of original assessment proceedings on 5-1-1972 had fully applied his mind and directed to file the certificates regarding the new cash credits, etc., which were duly placed on his record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mal Jagdish Chander and the other statement is general in nature which was made by that party to protect his own interest. Since that was the party making statement in some other case and did not mention the name of the assessee specifically, the entire gamet of reassessment proceedings was without any basis provided under law. The reassessment proceedings may, therefore, be cancelled. 11. It was also submitted that the loans were fully genuine and had been established so at the time of original assessment proceedings and could not be treated as non-genuine merely because of the third party who had not been allowed to be examined by the assessee making a statement in a third party proceedings in a general manner that the loan certificates issued by that party were not genuine. 12. Opposing these submissions, the revenue relying on the following judgments justified the reopening of the assessment that culminated into the impugned reassessment---Hazi Amir Mohd, Mir Ahmed v. ITO [1977] 110 ITR 630 (Punj. & Har.), Phool Chand Bajrang Lal v. ITO [1977] 110 ITR 834 (All.), Kirpa Ram Ramji Dass v. ITO [1982] 135 ITR 68 (Punj. & Har.), Jash Bhai F. Patel v. CIT [1982] 136 ITR 799 (Punj. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Malegaon Electricity Co. (P.) Ltd. is concerned, it is clearly different on facts and is of no avail for determination of the issue before us. In the case of Kantamani Venkata Narayana & Sons the Supreme Court laid down the proposition that the assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment of the relevant year by merely producing the books of account or other evidence. It was further observed by the Court that he has to bring to the notice of the ITO particular items in the books of account or portions of documents which are relevant. The judgment of the Supreme Court in the case of Bachu Lal Kapoor is clearly distinguishable on facts. 16. The Punjab and Haryana High Court in the case of Hazi Amir Mohd. Mir Ahmed held that the ITO was justified in reopening the assessment under section 147(a) if the statements made by some party subsequent to the original assessment were in any manner related to the assessee. The same Court in the case of Kirpa Ram Ramji Dass after considering the judgments of the Supreme Court in the cases of CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609, Madnani Engg. Works Ltd. and Lakhman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the belief contemplated by section 147(a) of the Income-tax Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words 'definite information' which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons which were later on deleted in de novo assessment proceedings conducted at the directions of the AAC. In the statement made by Ram Parshad Aggarwal, there is a general averment and he had been lending name for a pittance. There is no mention of the assessee particularly or any mention that the loans given to the assessee were false. Therefore, this information which the ITO claims was received subsequent to the original assessment does not establish a live link or a proximate connection between the information and the formation of his belief that income chargeable to tax in the assessment year under appeal had escaped assessment because of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. 22. It is to be noticed that it is not upon the assessee as held by the Supreme Court in the case of Burlop Dealers Ltd. to inform the ITO about the possible inference that may be raised against it. It was for the ITO to raise such an inference on the set of facts that the assessee had clearly placed before him and on which he had made necessary enquiries as list of all the creditors had been placed before him with necessary details, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
