1990 (12) TMI 122 - AT - Income Tax

Assessment Reopening Invalid, Gift Addition Upheld, Undisclosed Loans Partially Upheld

Income-Tax Officer. Versus Jotumal T. Thawani.

The reopening of the assessment under Section 147 was held invalid as the assessee had disclosed all material facts necessary for proper assessment. The ... Reassessment, Non Disclosure Of Primary Facts Issues Involved:1. Validity of reopening the assessment under Section 147.2. Deletion of addition of Rs. 1 lakh claimed as gift received from abroad.3. Deletion of additions of undisclosed loans and interest thereon.Issue-wise Detailed Analysis:1. Validity of Reopening the Assessment under Section 147:The primary issue was whether the reopening of the assessment under Section 147 was justified. The original assessment was completed under Section 143(3) on 22-9-1978, with the assessee disclosing a total income of Rs. 80,900. The Income-tax Officer (ITO) issued a notice under Section 154, which was later dropped, and subsequently, a notice under Section 148 was issued on 22-3-1980, citing the non-inclusion of Rs. 30,000 interest from Sippy Films.For reopening under Section 147(a), the following conditions must be satisfied:- There should be escapement of income.- There should be omission or failure on the part of the assessee to disclose fully or truly all material facts.- The ITO should have reason to believe.The assessee argued that all necessary facts were disclosed, including a note explaining the interest and tax deducted at source (TDS). The ITO had initially accepted this explanation but later changed his opinion, leading to the reopening of the assessment.The Judicial Member held that there was no failure on the part of the assessee to disclose material facts, emphasizing that the assessee's method of accounting was 'cash', and the cheque for Rs. 30,000 was encashed in the subsequent year. The Judicial Member also referred to a circular from the Central Board of Direct Taxes (CBDT) advising officers to assist taxpayers and not to take advantage of their ignorance.The Accountant Member, however, found discrepancies in the assessee's note and upheld the reopening under Section 147(a), stating that the ITO had reason to believe that income had escaped assessment.The Third Member agreed with the Judicial Member, concluding that the assessee had disclosed all material facts necessary for making a proper assessment, and the reopening under Section 147 was not justified.2. Deletion of Addition of Rs. 1 Lakh Claimed as Gift Received from Abroad:The assessee claimed a gift of Rs. 1 lakh from Mr. Abdul Rahim Zarwani of Dubai, which was disbelieved by the ITO but accepted by the Commissioner (Appeals). The department argued that the assessee did not know the donor personally, and there were discrepancies in the donor's name in the bank documents and confirmation letters.The assessee relied on a Tribunal decision accepting similar gifts from the same donor to near relations of the assessee. The Tribunal upheld the deletion of the addition, finding the gift genuine based on the consistency with previous cases.3. Deletion of Additions of Undisclosed Loans and Interest Thereon:The department added Rs. 65,61,275 comprising undisclosed loans and interest, based on 'Lab letters' indicating security provided to the assessee for loans given to film producers. The Commissioner (Appeals) deleted these additions, accepting the assessee's explanation that some Lab letters were for additional security.The Tribunal examined each item in detail:- Picture 'Shan': The Tribunal found that the existence of two sets of letters and Lab letters indicated reasonable inference of additional loans, but the quantification of the loan amount was restored to the ITO for re-adjudication after giving the assessee a reasonable opportunity of being heard.- Picture 'Chakravyuha': Similar reasoning applied, and the matter was restored to the ITO for quantification.- Picture 'Aashiq Hoon Baharon Ka': The Tribunal upheld the department's right to make additions but restored the matter for quantification.- Picture 'Swami': The existence of some arrangement was admitted by the assessee, and the matter was restored for quantification.- Picture 'Muqudar Ka Sikandar': The Tribunal upheld the department's right to make additions but restored the matter for quantification.- Picture 'Khoon Ki Pukar': The Tribunal upheld the department's right to make additions but restored the matter for quantification.- Picture 'Aafat': The Tribunal found insufficient evidence to support the addition and deleted it.- Picture 'Yaarana': The Tribunal found no authenticated documents indicating loans and deleted the addition.- Picture 'Suhag': The Tribunal found no basis for the addition in this year and deleted it.The Tribunal also directed the ITO to consider the aspect of telescoping of transactions and interest thereon.Conclusion:- The reopening under Section 147 was held invalid.- The deletion of the addition of Rs. 1 lakh as a gift was upheld.- Additions for loans and interest were partly upheld, with specific items deleted and others restored for re-quantification.