TaxTMI 
TaxTMI 
1996 (7) TMI 2
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..... 8,53,298 said to have been taken from a number of persons. The Income-tax Officer accepted the averment and made the assessment. During the assessment proceedings for the succeeding year 1960-61, the assessee again showed hundi loans in a sum of more than rupees seventeen lakhs. The Income-tax Officer enquired into the truth of the averment and found that many of them were bogus claims while some of the alleged lenders were found to be near relations of directors or principal shareholders of the assessee. The Income-tax Officer held that out of the hundi loans of more than rupees seventeen lakhs claimed by the assessee, loans totalling Rs. 11,15,275 were not established to be genuine loans and accordingly added that amount as income from undisclosed sources. Having regard to the similarity of the claims and the persons who are said to have advanced the said unsecured hundi loans during the accounting year relevant to the assessment year 1959-60, the Income-tax Officer issued a notice under section 148 calling upon the assessee to file a revised return for the assessment year 1959-60. Immediately, upon receiving the said notice, the assessee approached the Calcutta High ....
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.... (d) where excessive loss or depreciation allowance has been computed. Explanation 2. - Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. " "148. Issue of notice where income has escaped assessment.- (1) Before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. " " 151. Sanction for issue of notice.- (1) No notice shall be issued under section 148. after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied on the reasons recorded by the Income-tax Officer th....
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....guards conceived in the interest of eliminating room for abuse of this power by the Assessing Officers. The idea was to save the assessees from harassment resulting from mechanical reopening of assessment but this protection avails only those assessees who disclose all material facts truly and fully. 5. Coming to the facts of this case, the reasons recorded by the Income-tax Officer for reopening the assessment for the year 1959-60 are to the following effect : "In the course of the assessment proceeding for the assessment year 1960-61 investigations were made into the unsecured loans of Rs. 17,32,298 which was the position of the last day of the accounting year relevant to the assessment year 1960-61. These investigations disclosed that a large number of them were bogus hundi loans or loans from near relations of the directors or principal shareholders. Hence, the amounts credited to some of these accounts have been assessed as income from undisclosed sources to the extent of Rs. 11,51,275.00. Similar loans are noticed for the assessment year 1959-60 and they stand at Rs. 8,53,298 as per balance-sheet as on 16th April, 1959. I have, the....
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....put forward by the assessee, a large number were found to be bogus and that many of the so-called lenders were found to be near relations of the directors or the principal shareholders. He stated that similar loans are also noticed for the assessment year 1959-60 and, therefore, he has reason to believe that there has been no true and full disclosure of all material facts by the assessee for the assessment year 1959-60 leading to escapement of income. It is not alleged by the assessee that the Income-tax Officer had not checked up or tallied the names of the alleged lenders for both the assessment years and that he merely went by the fact that there were unsecured hundi loans for both the assessment years. In the absence of any such allegation --- which allegation, if made, could have afforded an opportunity to the Income-tax Officer to answer the said averment --- we must presume that the Income-tax Officer did find that a large number of alleged lenders who were found to be bogus during the assessment year 1960-61 were also put forward as lenders during the assessment year 1959-60 as well. Evidently, this is what he meant in the context, when he spoke of "similar loans" being not....
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....of the year in question.... The words used are 'omission or failure to disclose fully and truly all material facts necessary for his assessment for that year.' It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts ; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is a capital receipt, or a revenue receipt, the assessing aut....
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....hundi loans said to have been taken by him from non-existent persons or his dummies, as the case may be, and that on that account income chargeable to tax has escaped assessment. According to him, this was a false assertion to the knowledge of the assessee. The Income-tax Officer says that during the assessment relating to the subsequent assessment year, similar loans [from some of these very persons] were found to be bogus. On that basis, he seeks to reopen the assessment. It is necessary to remember that we are at the stage of reopening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it is that the Income-tax Officer could have investigated the truth of the said assertion --- which he actually did in the subsequent assessment year --- but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose....
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....nection or a live link for the formation of the requisite belief. " Learned counsel for the assessee, Sri Gupta placed strong reliance upon the decisions of this court in Chhugamal Rajpal v. S. P. Chaliha [1971] 79 ITR 603 ; ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609 as laying down propositions contrary to those laid down in Phool Chand Bajrang Lal's case [1993] 203 ITR 456 (SC). We cannot agree. The principle is well-settled by Calcutta Discount's case [1961] 41 ITR 191 (SC) and it is not reasonable to suggest that any different proposition was sought to be enunciated in the said decisions. Calcutta Discount's case [1961] 41 ITR 191 (SC) emphasises repeatedly the assessee's obligation to disclose all material facts necessary for his assessment fully and truly in the context of the two requirements called conditions precedent which must be satisfied before the Income-tax Officer gets the jurisdiction to reopen the assessment under section 147/148. This obligation can neither be ignored nor watered down. Nor can anyone suggest that a false disclosure satisfies the requirement of full and true disclosure. All....
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....elieve that the income chargeable to income-tax had been underassessed and the second that such underassessment has occurred by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the year 1953-54. So far as the first condition is concerned, the Income-tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under-invoiced the goods it exported. It is no doubt correct that the said finding may not be binding upon the income-tax authorities but it can be a valid reason to believe that the chargeable income has been underassessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income-tax Officer believe that there has been underassessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income-tax Officer under section 147(a) of the Act was satisfied. As regards the second condition, the appellant did not produce the books of account kept by them at their head office in London ....