TaxTMI 
TaxTMI 
1972 (12) TMI 33
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....under section 143(3) of the Income-tax Act, 1961. In respect of assessment years 1960-61 and 1961-62, the assessee had shown in his accounts a sum of Rs. 3,15,000 and Rs. 3,45,000, respectively, as representing borrowings on hundis from Multani bankers and also claimed deductions for interest paid in respect of those borrowings. These borrowings have been shown in the account books of the assessee also. He also gave a list of all the names of the creditors from whom he is said to have borrowed on hundis with their addresses to the Income-tax Officer. He produced the discharged hundis. The account books also disclosed that the interest on these hundis were paid by cheque. It was after a consideration of these materials available with the assessee, the above said assessment orders were made. It appears that the income-tax department came to know of the extensive prevalence of bogus lendings and borrowings in the names of certain persons and these are described as hundi "hawala" transactions. On investigation it came to light that these persons who are stated to have advanced monies on hundis to various businessmen were not real money-lenders or bankers, that they are very often pe....
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....nts should have disclosed that the assessee had not made a full and true disclosure of all material facts. Only then the Income-tax Officer could be said to have bona fide entertained a belief that the assessee had not fully and truly disclosed all the materials and because of that the income or any part thereof has escaped assessment. This, in short, is the contention of the learned counsel for the petitioner. It is true that the department had not questioned the persons who were said to have advanced loans to the petitioner with reference to the particular loan transactions shown by him in his account books. But those statements were recorded from them generally about their business and their lending capacity. It is also true that some of them have claimed to have had genuine transactions also apart from the hawala transactions. It is, therefore, all the more important for the Income-tax Officer to have satisfied himself with reference to the particular transactions of the assessee before issuing the notice under section 148. There can be no dispute that any fact or circumstance which forms the reason for the Income-tax Officer to believe that there was an omission or failure ....
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....cts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax Officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non-disclosure of material facts." The learned counsel for the petitioner then contended that the reports submitted by the Income-tax Officer to the Commissioner of Income-tax and the sanction of the Commissioner are not in strict compliance with sections 147, 148 and 151 of the Act. Though the learned counsel had no material with him in support of this contention, he advanced this argument on the basis that the counter-affidavit does not disclose that the report and the sanction complied with the provisions of the Act except stating that the Income-tax Officer had formed a reasonable belief on the basis of materials on record that the Multani bankers from whom the petitioner is supposed to have obtained hundi loans during the relevant accounting years, had only indulged in hawala transactions and that the said transactions really represent the assessee's income from undisclosed sources. In this connection, he also invited our atte....
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....sessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of clause (a) or clause (b) of section 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under section 148. " The Supreme Court further noted that to question No. 8 in the report which reads " whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148 ", it is merely noted " yes " and signed by the Commissioner of Income-tax. On this the Supreme Court observed: "We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under section 148. ... . We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. " ....
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....ows that the facts were analysed and a note was put up to the Commissioner and on being satisfied the Commissioner accorded sanction. The provisions of sections 148 and 151(2) are, therefore, satisfied. It was then contended by the learned counsel for the petitioner that the assessee had disclosed all material facts by producing all his account books wherein these loan transactions have been entered into disclosing the names and addresses of all those persons from whom he had borrowed on hundis, the discharged hundis and the payment of interest by cheque. There was no further obligation on him to instruct the Income-tax Officer about the inference to be drawn on these facts. If the Income-tax Officer felt any doubt he could have examined the creditors and satisfied himself. He having not done so, cannot be permitted to reconsider the same on a change of opinion, so to say. He also submitted that the material stated to have come to the possession of the Income-tax Officer is a subsequent " information come to the possession " of the Income-tax Officer within the meaning of section 147(b) and that, therefore, the case would fall under section 147(b) and not 147(a) of the Act. If i....
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.... to tax had escaped assessment. Such a case would appropriately fall under section 34(1)(b)." The Supreme Court further observed: "We are of the view that under section 34(1)(a) if the assessee had disclosed primary facts relevant to the assessment, he is under no obligation to instruct the Income-tax Officer about the inference which the Income-tax Officer may raise from these facts. The terms of the Explanation to section 34(1) also do not impose a more onerous obligation .... but where on the evidence and the materials produced the Income-tax Officer could have reached a conclusion other than the one which he has reached, a proceeding under section 34(1)(a) will not lie merely on the ground that the Income-tax Officer has raised an inference which he may later regard as erroneous. In the decision above-cited, the assessee had placed all the materials relating to the agreement. No fresh materials came, to the possession of the Income-tax Officer which showed that the agreement was got up as a device to reduce the profits except that on the same materials the Income-tax Officer has raised a different inference in the subsequent year than the one in the previous year. It is, ....
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....evidence that might be produced ultimately in the reassessment proceedings. They have no relevance to the question of jurisdiction of the Income-tax Officer to initiate proceedings under section 147(a). But we have no doubt that while appreciating the evidence available, the assessing and appellate authorities will take these circumstances into consideration and pass the reassessment orders on merits. It is next contended by the learned counsel for the petitioner that the Income-tax Officer could not invoke his powers under section 147(a) to reopen the assessment for the years 1960-61 and 1961-62, which were made under the Indian Income-tax Act, 1922, and if section 297(2)(d)(ii) were to be interpreted as enabling the Income-tax Officer to reopen the assessment under section 147(a) that provision violates article 14 of the Constitution. A similar contention was raised but was repelled by the Supreme Court in Jain Brothers v. Union of India. In that case, the assessee in respect of the assessment year 1960-61, did not file the return within the time prescribed in the notice under section 22(2) of the Indian Income-tax Act, 1922, but filed the return actually on November 18, 1961.....