TaxTMI 
TaxTMI 
1981 (9) TMI 75
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....ruit Company, a ghost firm, as per declaration filed by Gulab Singh Jain, advocate. Therefore, Notice u/s. 148 issued. " We are concerned, by the substance of the question referred to us, as to whether these facts are sufficient to justify the initiation of proceedings. However, the subsequent facts would also be relevant as they are now on record. The assessee was called upon to produce evidence in respect of the deposit in the name of M/s. Afgan Fruit Company, but was unable to produce the party. No oral or documentary evidence could be led to support the deposit and so, the assessment was completed by the ITO by adding a sum of Rs. 40,530 as income from undisclosed sources, the amount of Rs. 40,000, being the credit and Rs. 530, being the interest claimed to have been paid. In appeal before the AAC, a reference was made to the fact that in the original assessment proceedings some copies of accounts and other statements were filed and also a certificate of one Shri Girdhari Lal, stated to be the sole proprietor of M/s. Afgan Fruit Company, to the effect that a sum of Rs. 40,000 had been advanced to the assessee on 8th February, 1962, and received back with interest on 22nd ....
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.... the ground that there was no jurisdiction under s. 147(b) because there was no information which would allow the ITO to assume jurisdiction under that provision. Reference to these two orders has become necessary as well as to the conclusions of the Tribunal that in this particular case the information is sufficient because of the cryptic nature of the order passed on the record of this case which we have already reproduced. The question for consideration is whether there was material before the ITO to act under s. 147. There are two parts of s. 147, namely, sub-cl. (a) and sub-cl (b). Under sub-cl. (a), if the assessee fails to file a return or fails to fully and truly disclose all material facts, action can be taken. On the other hand, under sub-cl. (b) even if the assessee gives all the necessary information, but the ITO receives further information, which leads him to the belief that there was escapement of tax, then action can be taken. In the case of M/s. Faqir Chand Suraj Prakash, apparently, the ITO took the point that although all material facts were fully disclosed, there was information that the firm was bogus. But the Tribunal held that there was no such informat....
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....at he says is that from those communications 'it appears that these persons (alleged creditors) are name-lenders and the transactions are bogus'. He has not even come to a prima facie conclusion that the transactions to which he referred are not genuine transactions. He appears to have had only a vague feeling that they may be bogus transactions. Such a conclusion does not fulfil the requirements of section 151(2). What that provision requires is that he must give reasons for issuing a notice under section 148. In other words, he must have some prima facie grounds before him for taking action under section 148. Further, his report mentions: 'Hence proper investigation regarding these loans is necessary'. In other words, his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under section 148. Before issuing notice under section 148, the Income-tax Officer must have either reason to believe that by reason of the omission or failure on the part of the assessee to make a return under section 139 for any assessment year to the Incometax Officer or to disclose fully....
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.... said to have defaulted in truly and fully disclosing all material facts. The bogus nature of the transaction has to be found out during the first assessment and not by change of opinion on the same facts. We think that this judgment cannot apply to the present case because, although the facts are apparently the same, they are really not the same. In the first instance, the assessee could not have been called upon to show the material existence of M/s. Afgan Fruit Company or to show that the transaction in question was genuine. However, when it is found out in some other proceedings that this firm does not have any real existence, then the facts are different, hence, there can be reopening. In the case of Rai Singh Deb Singh Bist v. Union of India [1970] 77 ITR 802 (Delhi), it was held that if all material facts are disclosed in the first instance then, if new facts come to light at a later stage, it cannot be said to be a case when all material facts had not been disclosed. Undoubtedly, that was a strange case because some subsequent changes had taken place and there had been a change in the facts. What had happened in that case was that certain deposits stood in the names of c....