Reassessment for undisclosed material facts upheld where later information showed a cash creditor was merely a hawala name-lender.

Subsequent information showing that an alleged cash creditor was only a name-lender engaged in hawala transactions can provide reason to believe that the assessee did not truly disclose all material facts. On that basis, reassessment under the Income-tax Act, 1961 may be validly initiated where the original assessment had accepted the cash credit but later material undermined its genuineness. The controlling principle is that post-assessment information exposing a sham creditor can justify action for reassessment when it indicates failure of true and full disclosure.

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Issues: Whether action for reassessment under section 147(a) of the Income-tax Act, 1961, was validly initiated on the basis of subsequent information showing that a cash creditor had merely lent its name and no genuine advance had been made.

Analysis: The original assessment had accepted a cash credit of Rs. 20,000 in favour of the assessee. Later information in proceedings against the alleged creditor disclosed that the concern was carrying on hawala transactions and had merely lent its name, without advancing any money. On that basis, the reassessment proceedings were initiated. The controlling principle was that such subsequent information furnished the Income-tax Officer with reason to believe that material facts had not been truly disclosed, justifying action under section 147(a).

Conclusion: Action under section 147(a) of the Income-tax Act, 1961, was rightly taken and the question was answered in the affirmative, in favour of the Revenue and against the assessee.

Ratio Decidendi: Subsequent information revealing that an alleged cash creditor was a name-lender engaged in hawala transactions is sufficient to give the Income-tax Officer reason to believe that the assessee failed to disclose material facts truly, thereby justifying reassessment under section 147(a).

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