TaxTMI 
TaxTMI 
2002 (8) TMI 69
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....has been exercised are identical and the same are as follows: "THE PEERLESS GENERAL FINANCE AND INVESTMENT Co. LTD. Reasons for issuing notices under section 148 of the Income-tax Act for the assessment year 1973-74 On the basis of information available in, (a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89); (b) the Supreme Court's observations in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 (SC); and (c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979, the following facts of accounting of income and liabilities of the assessee-company came to light: (1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders. (2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even ....
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....e assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000, has escaped assessment for that year." It has to be kept in mind that this power was exercised on March 28, 1989, even for the assessment year 1973-74. During the course of hearing, learned counsel appearing on behalf of the Revenue produced the original of the reasons for furnishing such notices which contained appropriate endorsement of the Commissioner as well as of the Board as were necessary in terms of the then provisions contained in section 151 of the said Act. It is true that the judgment of the Supreme Court referred to in support of the reasons do not state that there had been suppression of income during the relevant years under consideration. It is also true that the report of the Reserve Bank of India has not been produced by the Revenue. It is again true that a portion of the said report, which has been quoted by the Supreme Court in yet another judgment, does not say that there had been suppression of income by the petitioner during any of the years in questio....
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.... auditor, having regard to the report of the auditor annexed to the affidavit-in-reply, to the effect "The liability to certificate holders as shown under the 'Social Welfare Scheme Fund' needs to be reviewed and in the absence of detailed information and records regarding unrevived and lapsed certificates, surrendered certificates, matured and unclaimed certificates, etc., additional interest provided, etc., the same have not been adjusted and accordingly prima facie the fund appears more than adequate pending detailed ascertainment and computation", it is anybody's guess as to since when such reflections had been made. It is true that in order to exercise power under section 148 of the said Act two things must be satisfied, namely, reason to believe and that the escapement is due to failure to disclose fully and truly all the material facts. As aforesaid, the auditor's report is more than sufficient to form a prima facie reason to believe. At the stage of section 148, it should not be construed to be a conclusive belief but should be construed to be a prima facie belief. As aforesaid, the auditor's report itself, to the effect as aforesaid, can make a person prima facie believ....
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....he contracts for the periods in question, used to be forfeited by the petitioner. Such forfeited amount used to be treated as income of the petitioner. The liability of the petitioner in its balance sheet towards the Social Welfare Scheme Fund used to be reduced to the extent of such forfeited amount. All these particulars have been admittedly furnished by the petitioner in the petitioner's returns for the relevant years. Despite that, the actual liability of the petitioner towards its depositors is less than the liability shown in the balance sheet under the heading "Social Welfare Scheme Fund". How can this be? The petitioner has, itself answered the same in the instant writ petitions and, in particular, in paragraph 10 thereof, which is as follows: "10. Under the said method of accounting followed and adopted by the petitioner-company the amount on a lapsed certificate actually forfeited by the petitioner-company was deducted out of the said fund and credited to the profit and loss account in the year of forfeiture. In respect of any lapsed certificate the petitioner-company is entitled to forfeit the amount of subscription paid only if it has not acquired the surrender va....