Sambasiva Rao, Actg. C.J.
1. The question raised in I.T.C. No. 193 of 1976 is consequential to the question formulated in I.T.C. No. 194 of 1976.
2. The department wanted the following question to be referred to the High Court :
' Whether on the facts and in the circumstances of the case, the order of the Appellate Tribunal cancelling the reassessment proceedings for the assessment year 1957-58 is sound in law '
3. The Tribunal rejected this contention saying that it is a question of fact. It rejected the revenue's contention on a consideration of all the facts and circumstances of the case. It is against this refusal that I.T.C. No. 194 of 1976 is filed.
4. I.T.C. No. 193 of 1976 raises the consequential question :
' Whether, on the facts and in the circumstances of the case, the order of the Tribunal cancelling the penalty levied under Section 271(1)(c) by the Inspecting Assistant Commissioner in the assessment year 1957-58 is sound in law '
5. The question arose in the following manner. The assessee claimed certain credits for the year 1957-58 and, on an assessment, the Income-tax Officer accepted them. Subsequently, some statements were made by some persons before the Bombay Income-tax Officer that these credits were not really advanced. The Bombay officer wrote to the Income-tax Officer, Nellore, about this. Saying that he is prima facie satisfied that certain bogus credits were claimed by the assessee, the Income-tax Officer reopened the assessment He repelled the contention of the assessee that it could not be reopened and levied tax on these amounts which are said to be bogus credits.
6. The assessee preferred an appeal to the Appellate Assistant Commisioner of Income-tax, Guntur. He upheld the decision of the Income-tax Officer. He further started penalty proceedings and levied penalty under Section 271(1)(c) of the Income-tax Act. Appeals were preferred by the assessee to the Appellate Tribunal. The Tribunal went into the matter in great depth and detail. It first took notice of the fact that while making the original assessment for the year 1957-58, the Income-tax Officer went into the genuineness of the hundi loans after going through a number of documents filed by the assessee. The Tribunal thought, therefore, that the genuineness of the credits have been gone into and the Income-tax Officer did not disbelieve the hundi loans other than the one he specifically rejected. Then, the Tribunal pointed out that the only basis for reopening the assessment was the letter received from the Income-tax Officer, Hundi Circle, Bombay, where two persons who are said to have given credit to the assessee had stated that they were only 'havala' transactions. On mere receipt of this letter, the Income-tax Officer, Nellore, proposed to reassess and started those proceedings. The Tribunal found that actually the statements m;ide by the two persons were not brought on record. It was also pointed out that the Tribunal wanted those statements to be produced but the department was not able to produce them. It was not known that the two persons ategorically stated that they had not lent any money to the assessee. There was nothing to indicate that the two hundi creditors had denied having lent monies to the assessee specifically. The Tribunal further pointed out that there was no use relying on what the Bombay officer informed the Nellore officer. In the absence of the basic material, the Tribunal concluded that the Nellore officer was not justified in reopening the assessment under Section 147(a). As a second ground, the Tribunal also pointed out that the assessee at the time of the original assessment placed all the facts truly and fully before the Income-tax Officer who made the original assessment. It was for the Income-fax Officer to have investigated into the matter and recorded the findings one way or the other. That officer thought fit to accept the evidence produced by the assesses and made the assessment. In respect of the same matter, after all this had been done, he cannot reopen the assessment. For these reasons, it set aside the decision of the Income-tax Officer as confirmed by the Appellate Assistant Commissioner for reopening the assessment. It also set aside the penalty imposed on the assessee by the Inspecting Assistant Commissioner.
7. When the Tribunal was approached by the department to refer the above two questions to the High Court, the Tribunal said that no questions of law arose because the Tribunal held against the department on an appreciation of the evidence and the circumstances of the case.
8. Sri Rama Rao, learned standing counsel for the revenue, argues that what was in question before the Income-tax Officer and also the Appellate Tribunal was not the actual reassessment, but the question whether there was sufficient ground for reopening the assessment. According to the submission of the learned counsel, the letter of the Bombay officer forms sufficient basis for the Nellore officer to reopen the assessment. This contention of Sri Rama Rao does not commend itself to us. The basic precaution that the department should have taken was to have the statements recorded by the Bombay officer placed before the Income-tax Officer, Nellore. They were not brought on record at all. It is very unsafe to act on a mere letter when such statements or their true copies were not enclosed. Even when the Tribunal wanted them to be produced the department did not do it. It was not known whether the two persons have categorically stated that they had not lent any money. As the Tribunal has pointed out, a mere intimation of some statements recorded by the Bombay officer does not form a ground for reopening the assessment.
9. The Tribunal repelled the request of the department to refer this question to the High Court on a full consideration of the facts and circumstances. There is no question of law which arises in this matter. Therefore, we dismiss these two I.T.Cs., but, in the circumstances, without costs.