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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 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, Ludhiana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 were considered. It was after consideration of the entire cash credits appearing in the books of account of the assessee for the assessment year under appeal that he made the addition of Rs. 30,000 and the interest thereon. According to the learned counsel for the assessee there is a detailed list of cash credits taken in the hands of the ITO or some official of the department at his instance which, inter alia, includes the name of the impugned creditor Bansi Lal Hans Raj. These details were before the ITO at the time of original assessment proceedings and were duly examined to his satisfaction before making the addition of Rs. 30,000 in the name of Bharat House and interest on the sum of Rs. 30,000 standing in the name of that party. It was, therefore, subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty 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. Har.), Frontier Trading Co. v. P.N. Chaudhry, ITO [1982] 136 ITR 503 (Punj. Har.), CIT v. Ess Ess Kay Engg. Co. (P.) Ltd. [1982] 137 ITR 446 (Punj. Har.), ITO v. Bachu Lal Kapoor [1966] 60 ITR 74 (SC), Kantamani Venkata Narayana Sons v. First Addl. ITO [1967] 63 ITR 638 (SC) and Malegaon Electricity Co. (P.) Ltd. v. CIT [1970] 78 ITR 466 (SC). It was particularly submitted that reassessment under section 147(a) read with Explanation 2 gave the powers to the ITO to initiate reassessment proceedings because mere production before the ITO of account books or other evidence from which material evidence could with due diligence have been discovered by the ITO will not necessarily amount to disclosure within the meaning of this section. 13. It was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Lakhmani Mewal Das held that though a mere change of opinion on the same material on which original assessment was made will not be sufficient to initiate proceedings for reassessment under section 147(a) if some information comes to the possession of the ITO and he has reason to believe that income chargeable to tax has escaped assessment because of the assessee not having fully and truly disclosed all material facts, section 147(a) will be fully applicable. 17. In the case of Frontier Trading Co., the Punjab and Haryana High Court held that where the original assessment was completed accepting certain loans shown in the accounts as genuine and, subsequently, the alleged creditor made statement before the ITO that he had been carrying on a hawala business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening 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 in section 147 of the Act of 1961 would not lead to the conclusion that action can now be taken for reopening the assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence." 19. In the case of Madnani Engg. Works Ltd. on set of facts which is clearly the same as in the case before us, the Hon'ble Supreme Court applied the case of Burlop Dealers Ltd. 20. We have also a judgment from the Punjab and Haryana High Court by the Division Bench in Jai Singh Kulbir Singh's case in which the judgments of the Supreme Court in the cases of Lakhmani Mewal Das, Madnani Engg. Works Ltd. and Burlop Dealers Ltd. have been consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 if he had not done so in the original assessment, the income that escaped assessment, if any, could not be brought to tax under section 147(a) because the assessee had done his part of disclosing the primary facts necessary for the assessment. 23. The ITO merely acted on the circular letter issued by the IAC and did not make any enquiry to find out whether the statement made by Ram Parshad Aggarwal was in any way related to the facts of the case of the assessee either by examining him or by any other evidence to establish a live link between that information and the formation of his belief. Since such a link had not been established, the reassessment proceedings were not in accordance with law. 24. The revenue has propounded a legal proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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