TaxTMI 
TaxTMI 
TaxTMI 
1984 (7) TMI 21
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....iculars were not furnished. The ITO had, therefore, to summon and record the statement (annexure 6) of R. K. Parikh, the managing director of M/s. Traders and Miners Ltd., on February 26, 1975. It appeared from Parikh's statement that the petitioner and M/s. Traders and Miners Ltd. were carrying on their respective businesses from the same premises and that in fact the employees of the petitioner had been working for M/s. Traders and Miners Ltd. as well. The ITO, thereafter, recorded the statement (annexure 5) of P.D. Poddar, the Executive President of the petitioner on March 15, 1975. Poddar's statement also did not help the ITO in ascertaining the particulars of sales alleged to have been effected through the agency of M/s. Traders and Miners Ltd. On March 19, 1975, the petitioner wrote a letter (annexure 7) giving some information regarding the services alleged to have been rendered by M/s. Traders and Miners Ltd. for the petitioner. The ITO made the assessment order (annexure 8), dated March 27, 1975, under s. 143, I.T. Act, 1961, (hereinafter called " the Act "). He did not discuss in that order the merits or otherwise of the petitioner's claim of deduction of Rs. 7,80,952 on ....
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....vidence showing that no commission, etc., had been paid to M/s. Traders & Miners Ltd. and that, therefore, the amount of Rs. 7,80,952 may not be allowed as deductible expense for the assessment year 1972-73. The petitioner made a reply to that notice on September 11, 1982, stating that the necessary material had already been placed before the ITO who made the assessment for the assessment year 1972-73 and that he had correctly allowed the amount of commission paid to the sole selling agents as deductible expense. The petitioner further submitted in its reply that merely because the Department had subsequently collected some information in the course of making assessment for the year 1976-77 and rejected, on the basis of that information, the petitioner's claim for similar deduction during that year, such subsequent information is no ground for reopening the assessment for the year 1972-73. The petitioner demanded a copy of the reasons recorded by the ITO for issuing notice dated April 22, 1978, under s. 148(1) of the Act. The petitioner threatened that if the proceedings were not dropped and the notice under s. 148(1) was not discharged, he would be left with no alternative but t....
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.... petitioner as a device to escape assessment and that in fact the so-called sole selling agent had not rendered any service to the petitioner. Those surveys revealed that many persons, who are alleged to have rendered services at various centres were simply non-existent and fictitious, and that others who were existent had not rendered any such service as alleged. These investigations and surveys revealed that the petitioner had escaped assessment on a total income of Rs. 30,61,693 spread over four different assessment years as follows : Rs. 1970-71 5,62,983 1971-72 6,48,533 1972-73 7,80,952 1973-74 10,69,225 --------------------- Total 30,61,693 --------------------- The respondents pleaded that it is not a case of the ITO changing his mind in respect of the same material, but it is a case of concealment of material facts by the petitioner and of the ITO discovering subsequently that M/s. Traders and Miners Ltd. was nothing but an alter ego of the petitioner and that it had not rendered any service to the petitioner in any of the four years mentioned above to entitle the petitioner to claim deductions on account of the so-called expenses incurred on the sales of ....
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....oned in this context that the petitioner did not furnish at any time the particulars regarding the purchasers of its products. It did not disclose the name of any person who might have negotiated those sales. P.D. Poddar of the petitioner and R. K. Parikh of M/s. Traders and Miners Ltd. made statements before the ITO during the course of the assessment proceedings which statements, according to the assessing authority, are " most revealing, being evasive, short of required details and most unsatisfactory in nature ". Thus, according to the assessing authority, a major portion of the petitioner's income escaped assessment by reason of concealment of material facts necessary for assessment for that year. It is common ground that this case falls under s. 147(a) of the Act. reference to the reasons recorded by the ITO under s. 148(2) (See annexure R-3) and the satisfaction recorded by the Commissioner under s. 151(2) (see annexure R-4) to the effect that it was a fit case for the issue of notice under s. 147(a) read with s. 148 would at once show that recourse was being taken by the ITO to the provisions of s. 147(a) for reopening the assessment for the year 1972-73. Section 147, in ....
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....ng so and had obtained the prior approval of the Commissioner for issuing such notice. The ITO stated in that document that he believed that the amount of Rs. 7,80,952 shown by the assessee as expenditure incurred on its sales by way of commission paid to the sole selling agents had escaped assessment. The ITO recorded his reasons for entertaining such belief. The Commissioner was satisfied as to the existence and sufficiency of those reasons and consequently recorded his satisfaction stating that it was a fit case for reopening the assessment and issuing a notice under s. 148 of the Act. As held by the Supreme Court in Calcutta Discount Company's case [1961] 41 ITR 191 and several other cases, the sufficiency of the reasons as recorded by the ITO is not justiciable. Of course, the existence of the reasons for such belief is justiciable. Now, a few words about the existence of reasons for the aforementioned belief entertained by the ITO. The reasons, as set out in annexure R-3, are that the petitioner company and M/s. Traders and Miners Ltd. both belong to the same industrial house known as the group of Kanorias at Calcutta and that the arrangement regarding M/s. Traders and Miner....
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....les alleged to have been made by the petitioner through the agency of M/s. Traders and Miners Ltd. during the previous year ending December 31, 1971. Those particulars were absolutely essential for the ITO for coming to a correct conclusion as to whether the alleged expenditure by way of commission to the sole selling agents had in fact been incurred or not in the course of business of the sales of the products of the petitioner company during that year. The Supreme Court further held in Calcutta Discount Company's case [1961] 41 ITR 191, that it is the duty of the assessee who wants the court to hold that jurisdiction was lacking to establish that the ITO had no material at all before him for believing that there had been such non-disclosure. Instead of discharging this onus, the petitioner in the instant case has produced documents which would reveal that the petitioner did all he could to conceal the material bearing on, and relevant to, the sales of its products during the previous year ending December 31, 1971. The petitioner filed a return of income in the prescribed form for the assessment year 1972-73 in accordance with the provisions of s. 139 of the Act. This return was ....
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....le selling agent. It was under these circumstances that the ITO decided to record the statements of P. D. Poddar, principal officer of the petitioner company, and of R. K. Parikh, managing director of M/s. Traders and Miners Ltd. These statements were recorded in February, March 1975. Parikh told the ITO that all businesses between his company and the petitioner company used to be transacted orally and that his employees had been orally informing the employees of the petitioner in respect of orders secured from prospective purchasers. He went on to say that no evidence was available with his company to prove the orders secured by it for the petitioner company. He made hold to state that his company did not maintain any record of any such sale as aforementioned. He further disclosed that in fact his company was not having any godowns nor was it effecting any insurance of the goods involved. All this, according to him, was done by the petitioner company itself and they were reimbursed by his company for such facilities provided and services rendered. It is, therefore, obvious that the statement of Parikh does not give us any information regarding the particulars of the so-called sa....
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....e relevant previous year. The Supreme Court held in Calcutta Discount Company's case [1961] 41 ITR 191, that if there were in fact some reasonable grounds for thinking that there had been any nondisclosure as regards any primary fact which could have a material bearing on the question of underassessment, that would be sufficient to give jurisdiction to the ITO to issue notice for reassessment. In the present case, the concealment in question had a direct bearing on the question of underassessment. For all these reasons, I have no hesitation in holding that the second condition for giving jurisdiction to the ITO to reopen the assessment is also satisfied. I may now deal with a few rulings cited by Mr. S. M. Mehta, learned counsel for the petitioner. In the Calcutta Discount Company's case [1961] 41 ITR 191 (SC) cited by Mr. Mehta, the assessee had, unlike the petitioner in the present case, disclosed in the course of the original proceedings of assessment all the sales of shares made by him during the relevant previous year. The ITO accepted the assessee's version that the assessee was merely an investment company and that the sales of shares were casual transactions of changing i....
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....ssue notice under that section on the basis of information in his possession which leads him to believe that income chargeable to tax has escaped assessment. He cannot issue such a notice merely on the basis of a suspicion. The Bench drew a distinction between "information " and " suspicion " and held that mere " suspicion " would not give jurisdiction to the ITO to issue notice under s. 147(b). This authority is also, therefore, not relevant for our present purpose. Other cases cited by Mr. Mehta are ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR I (SC), CIT v. Bhagwan Ltd. [1983] 144 ITR 699 (Cal) and ITO v. Dwarka Das and Brothers [1981] 131 ITR 571 (Delhi). These cases are being discussed together for they all relate to hundi loans which had been disclosed in the original assessments and even then the ITO concerned sought to reopen the assessment on the ground that the loans were bogus. The impugned notices of reassessment in those cases Were quashed on the ground that so far as the assessee was concerned, he had made the necessary disclosure by producing the hundis on the strength of which he had obtained loans from creditors and his account books, and that it was for t....