1980 (1) TMI 85 - HC - Income Tax

Court rejects reassessment under Section 147(a) of Income-tax Act, assessee awarded costs

The court ruled in favor of the assessee, holding that the reopening of assessment under section 147(a) of the Income-tax Act, 1961 was not justified. The ... Failure To Disclose Fully And Truly Issues:Reopening of assessment under section 147(a) of the Income-tax Act, 1961 based on alleged bogus hundi loans claimed by the assessee for the assessment year 1961-62.Detailed Analysis:The assessee claimed a deduction of interest on loans advanced through hundis for the assessment year 1961-62, supported by hundi khokhas and account payee cheques. However, the assessing officer reopened the assessment upon receiving information about a racket in Bombay involving the introduction of secreted funds through multani hundi bankers. Statements from hundi bankers denied advancing genuine loans, leading to the disallowance of the interest deduction claimed by the assessee. The Tribunal was asked to consider whether the reopening of assessment was justified under section 147(a) of the Income-tax Act, 1961.The revenue authorities found that the information received from Bombay, along with statements from hundi bankers, provided a reasonable basis for the assessing officer to believe that income had escaped assessment. This belief was supported by direct external evidence and was not merely a change of opinion. The statements of the bankers were general in nature and did not specifically implicate the assessee in the alleged bogus loans, nor did they mention the relevant time period. The case of ITO v. Lakhmani Mewal Das was cited, emphasizing the need for a direct link between the material before the assessing officer and the belief formed.In contrast, the revenue relied on the case of Phool Chand Bajrang Lal v. ITO, where a confession particularized with reference to time was deemed sufficient for reopening an assessment. However, the court found that the present case lacked specificity in terms of naming the assessee as the borrower, specifying the actual loans shown in the books, and identifying the relevant time period. The court distinguished Phool Chand Bajrang Lal's case from the current scenario based on these factors.Further, the department's reliance on M. Varadarajulu Naidu v. CIT was noted, where the Madras High Court distinguished the Lakhmani Mewal Das case based on specific facts. However, no distinguishing feature was found in the present case, leading the court to answer the question in favor of the assessee, holding that the reopening of assessment was not justified under section 147(a) of the Income-tax Act, 1961. The assessee was awarded costs amounting to Rs. 200.