B.S. Dhillon, J.
1. The petitioner-firm is an assessee of the I.T. department. The petitioner filed' the return for the assessment year 1959-60 and the assessment was completed on 16th November, 1959. According to the petitioner, all relevant facts which were required for making an assessment were disclosed by him. However, the I.T. Dept. had some suspicion that a sum of Rs. 95,000 which was borrowed from the following companies:
Ashok Kumar GolaChand, Bombay
Jamuna DassVasudev, Bombay
Arjan Dass VashnuMai, Bombay
was a bogus amount and the petitioner had introduced his own unaccounted income to the extent of Rs. 95,000 in the shape of bogus cash credits and, according to them, the income of the assessee escaped assessment to that extent. The ITO reopened the case of the petitioner under Section 147(a) read with Section 148 of the I.T. Act, 1961 (hereinafter called 'the Act' ), and issued a notice to the assessee. Thereafter, on 14th September, 1962, the ITO, after considering the whole matter and seeing the original hundi counterfoils, came to the conclusion that the transactions in question were in order and thus the proceedings were dropped.
2. Thereafter, the ITO issued another notice on 15th December, 1967, which is dated 4th December, 1967, and a copy of which is annex. B withthe writ petition, pertaining to the same assessment year again reopening the case of the petitioner under Section 147(a) read with Section 148 of the Act. According to the petitioner, he made a representation to the Commissioner that the reassessment should not be reopened and he having reliably learnt that his representation has been rejected by the Commissioner, filed this petition under Articles 226 and 227 of the Constitution on 21st September, 1971, praying that the impugned notice issued under Section 148 of the Act, a copy of which is annex. B to the writ petition, be quashed.
3. It has been averred in the petition that the ITO had no material to hold that the petitioner was guilty of not having disclosed fully and truly all material facts and, therefore, the ITO could not have any reasonable belief to issue the notice in question. In the reply filed on behalf of Shri Gujjar Mal, ITO, 'A' Ward, Jullundur, it has been averred in paras. 7, 8 and 9 thereof as follows :
'7. That para. 7 of the petition is admitted in so far as it alleges that the various facts mentioned in (i) to (iv) of the para, under reply were urged by the petitioner before the Income-tax Officer. It is, however, denied that all the material facts were placed before the department. In fact what was placed before the department was the apparent state of things. In reality no loan was taken by the petitioner-assessee from the aforesaid five parties. Though it is correct that these five parties were actually carrying on their business in Bombay, they were not genuine, money-lenders but they were name-lenders only. This fact was discovered long afterwards in October, 1963, September, 1965, and December, 1965. As a result of investigations and raids carried out by the income-tax department at Bombay, it came to light that numerous parties including the five parties mentioned in paras. 5 and 10 of the petition were engaged in what is. known as havala business, that is to say, they lent their names as banker to hundi and pronote transactions which were bogus and were meant to give a tinge of genuineness to the actions of assessees like the petitioner in introducing their own secreted profits in their books.
Though it is true that the-original hundi counterfoils were produced by the petitioner and the payments were shown as having passed through well-known banks, yet facts came to light subsequently in 1963 and 1965, showed that this was all clever manipulation on the part of the assessee to conceal the real state of affairs. Under the garb of loans from other parties he was utilising his own unaccounted-for money.
8. That para. 8 of the petition is admitted in so far as the Income-tax Officer dropped the proceedings on 14th December, 1962, without any further investigation satisfying himself with the apparent state of affairs only. In fact it appears that the Income-tax Officer fell into the clever trap laid by the petitioner for concealment of his real income. It may bementioned here that the first knowledge of large scale concealment was discovered only in 1963 and thereafter when large scale raids and investigations into the manipulations in Bombay, Calcutta and Madras markets brought to light this modus operandi. As a result of the classified information gathered from these investigations the various Commissioners of Income-tax, Bombay, Calcutta and Madras circularised particular information with regard to each havala dealer and the banks discounting such hundis to the Commissioners of Income-tax elsewhere. In turn this information was passed on by the Commissioner of Income-tax, Punjab to all the Income-tax Officers under him.
On receipt of this information, the matter was further investigated with regard to the petitioner's dealings with these five parties and it was found that this was a clear case of escapement of income through deliberate concealment on the part of the petitioner-assessee.
9. That para. 9 of the petition is not correct. Action under Section 147/148 can be taken any number of times on receipt of fresh information. As detailed above, in the instant case, there was voluminous fresh information in the form of classified information circulated by the various heads of income-tax department at Bombay, Calcutta and Madras from time to time after September, 1963. Some of this information related to the parties mentioned in the petition itself.'
4. It was further averred in para. 10 of the return as under:
'10. ......In fact in the classified information circularised by theCommissioner of Income-tax, Bombay, in his circular dated 1st December, 1965, there are facts showing that Kalba Devi branch and Princess Street branch of the Union Bank of India Ltd., Bombay, which discounted some of the hundis in the instant case were not authorised to discount hundis at all. In fact, there is further information showing that all such transactions done by these two branches since 1957 were bogus. That is why these branches stopped this business by October, 1962.
As detailed above all this information came to the notice of the income-tax department only some time by the middle of 1963 and, thereafter, these fresh facts, particularly when they personally involved the five parties dealt with by the petitioner-assessee, was fresh material and information on the basis of which the second notice under Sections 147(a)/148 of the Income-tax Act, 1961, could validly be issued to the petitioner.
It is open to the petitioner to show during the course of the proceedings that have commenced that there was no omission or failure on hispart to give full facts or that in spite of the record of the five Bombayparties mentioned in the para, under reply his particular transactionswith them were genuine. However, this petition is wholly misconceived. '
5. It is well settled by now that proceedings under Section 147(a) read with Section 148 of the Act can, be initiated within a period of eight years from the end of the relevant year if two conditions are satisfied, viz., (i) the ITO must have reason to believe that income chargeable to tax has escaped assessment; and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee, (a) to make a return under Section 139 for the assessment year to the ITO, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer jurisdiction on the ITO, to initiate the proceedings. As regards the disposal of the petition on facts, the same could be disposed of with relevance to the principles of law referred to above, but Shri Bhagirath Dass, the learned counsel for the petitioner, has advanced another argument, which, if accepted, will enjoin upon this court to quash the notice without going into the facts of the case. It has been vehemently contended by the learned counsel for the petitioner that in law if the assessment has been completed after due investigation regarding a particular assessment year on the basis of the facts mentioned in the return, then subsequently it is not open to the ITO to initiate the proceedings for reassessment under Section 147(a) of the Act, as, according to the learned counsel, the assessee having disclosed the material facts and the said facts having been found to be correct after due investigation, cannot be held to be guilty of having omitted to disclose fully and truly all material facts necessary for his assessment for that year. With >a view to appreciate the contention, the provisions of Sections 147, 148 and 149 of the Act may be reproduced as under:
' 147. If-
(a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or
(b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) 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,
he may, subject to the provisions of Sections 148 to 153, assessor reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in Sections 148 to 153 referred to as the relevant assessment year).....
Explanation 2.--Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.
148. (1) Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that Sub-section,
(2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so.
149. (1) No notice under Section 148 shall be issued-
(a) in cases falling under Clause (a) of Section 147-
(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under Sub-clause (ii);
(ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year ;
(b) in cases falling under Clause (b) of Section 147, at any time after the expiry of four years from the end of the relevant assessment year...'
6. However, in view of Explanation (2) to Section 147 of the Act, Shri Bhagirath Dass, the learned counsel for the petitioner, conceded that in a case where no investigation has been made and even though the account books or other evidence from which material evidence could be, with due diligence, discovered by the ITO having been produced, the ITO will have jurisdiction to initiate the proceedings under Section 147(a) of the Act. However, it was contended by the learned counsel that it is not the duty of the assessee to disclose that the entries in his account books and, consequently,in the return, regarding the taking of a loan of Rs. 95,000 from five persons mentioned therein, were false. It has been contended that if the material facts necessary for the assessment are fully disclosed and after investigation the same have been accepted by the ITO, subsequently on further information having been received that the assessee's income has escaped assessment for that year on account of the assessee having concealed material facts or on account of his having given false facts, this cannot be the basis for the reopening of the assessment under the provisions of Section 147(a) of the Act, but the same may be reopened under the provisions of Section 147(b) of the Act for which the limitation is only four years. It was contended that the reassessment proceedings in the present case were initiated after the lapse of four years and the same could not have been initiated under Section 147(a) of the Act, therefore, the issuance of notice is without jurisdiction.
7. After hearing the learned counsel for the parties at great length and keeping in view the plethora of authorities, laying down the law in question in issue, interpreting the provisions of Sections 147 (a) and (b) of the Act, which provisions are in pari materia with Section 34(1)(a) and (b) of the Indian LT. Act, 1922, we are of the opinion that the contention of the learned counsel for the petitioner is not sustainable in law. The law enjoins upon the assessee a duty to disclose fully and truly all material facts necessary for his assessment of the year concerned. It is true that it is not the duty of the assessee to point out that he has cooked the accounts or has made false entries but the law certainly enjoins upon him to prepare the account books and make relevant entries which are factually correct and such material facts are then to be disclosed fully and truly to the ITO for enabling him to assess the income. In order to appreciate the contention, we are presuming for argument's sake, that the entries regarding the loan of a sum of Rs. 95,000 are false. On the other hand, the assessee claimed that he had taken the said loans. In other words, he did not receive any monetary advances but he told the ITO that they were his creditors. We may presume that even though the assessee received no money as loans, yet all the formalities were observed and the hundis were executed and discharged. Since no money passed between the parties on any occasion, the discharged hundis represented sham transactions. In other words, the hundis and other records produced by the assessee should tend to show as if certain transactions had taken place but, in reality, the transactions never took place. In such a case, the discharged hundis and the other entries cannot be taken as evidence of facts. They are merely papers fabricated to give a false appearance to certain monetary transactions which never took place. The said documents could not be said to be narrating true facts. In such a case, even though the assessee disclosed the discharged hundis and other entries before the ITO and gave the list of addresses of spurious creditors thereby falsely showing his income from actual transactions which had taken place between spurious creditors and the petitioner, one can hardly say that the assessee had made a full and true disclosure of material facts. Such a disclosure cannot lend facthood to transactions which in fact did not take place. What the assessee has done is that he disclosed certain spurious papers and particulars regarding certain transactions which were themselves not facts. The ordinary dictionary meanings of the word 'fact' are 'occurrence of event, things certainly known to have occurred or be true, reality ; true or existent'. A particular transaction which has never taken place, cannot be held to be a disclosure of true facts. In such a case, it would be a mockery to hold that the assessee has made a full and true disclosure of facts. Thus, in such a case it is to be held that the disclosure made by the assessee is formal evidence of fictitious transactionswhich had never taken place and they are a mere cloak, to cover up the facts. In such a case, the fullness and completeness of such a disclosure is immaterial. In fact the more copious the materials disclosed in a case like this, the more solid is the crust covering up the real facts. In a case of this type, it is, therefore, futile to contend that the provisions of Section 147(a) of the Act would not be applicable.
8. The contention of the learned counsel for the petitioner is that in Section 147(a) of the Act, the Legislature has not used the words 'in consequence of information' and, therefore, the subsequent information received by the ITO regarding the falsity of the facts disclosed by the assessee, cannot be considered for initiating proceedings under Section 147(a) of the Act, is without any merit. The real distinction between the provisions of Section 147 (a) and (b) is that where the assessee is found to be lacking in disclosing fully and truly all material facts necessary for the assessment in question, the provisions of Section 147(a) of the Act will be attracted, so as to give eight years' limitation to the revenue to re-initiate the reassessment proceedings, but in case where the assessee is not guilty of suppression of material facts, and has given the said facts fully and truly, but the income of the assessee has escaped assessment, then, inconsequence of the information received by the ITO, if he has reason to believe that the income chargeable to tax has escaped assessment, the provisions of Section 147(b) of the Act will be applicable and in such a case the limitation will be only four years.
9. The contention of the learned counsel for the petitioner that if the cases of the type where false entries have been made are also covered under Section 147(a) of the Act, in that case no case will be covered by Section 147(b) and the said provision will be rendered redundant, is again without any merit. Many instances may be given where the assessee has fully and truly disclosed all material facts necessary for the assessment, yet the income of the assessee chargeable to tax having escaped assessment, and such a case would thus be covered by Clause (b) of Section 147 of the Act. However, we may make it clear that a mere change of opinion on the same material on the basis of which the original assessment was made, will not be sufficient to initiate proceedings under Section 147(a) of the Act for reassessment, but if some information comes into the possession of the ITO and he has reason to believe that the income chargeable to tax has escaped assessment because of the assessee being guilty for not having fully and truly disclosing all material facts, in that case, the provisions of Section 147(a) of the Act will be fully applicable. The view, which we are taking, is supported by a number of decisions. In a Full Bench case of the Calcutta High Court in Lahhmani Mewal Das v. ITO : 99ITR296(Cal) , the majority of judges took the view that disclosure of facts, which are non-existent, or supply of false information on the basis of which the assessment has been ordered, if found out to be, false subsequently, would not entitle the assessee to take a plea that the provisions of Section 147(a) of the Act are not applicable. The majority judgment of the Calcutta High Court was affirmed by their Lordships of the Supreme Court in ITO v. Lakhmani Mewal Das : 103ITR437(SC) . It is no doubt true that their Lordships of the Supreme Court decided the case on the second question holding that the grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act, must have a material bearing on the question of escapement of income of the asses-see because of his failure or omission to disclose fully and truly all material facts, but their Lordships held that once there exists reasonable grounds for the ITO to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. However, on the facts of that case, their Lordships came to the conclusion that the majority of their Lordships of the High Court were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee had escaped assessment because of his failure or omission to disclose fully and truly all material facts. Their Lordships thus upheld the view of the majority and dismissed the appeal. It may be observed that if their Lordships were not agreeing with the view taken by the majority of the judges of the High Court that a duty is enjoined upon the assessee to disclose fully and truly the material facts and not the facts which are non-existent in that case, then the second question, whether the ITO had material for entertaining the belief, would not have been necessary to be gone into, and the case could have been disposed of on the first ground alone, but this course was not adopted by their Lordships.
10. A Division Bench of this court in Hazi Amir Mohd. Mir Ahmed v. CIT , held as follows (headnote):
'That if the Income-tax Officer has reason to believe that primary facts were not fully disclosed or that they were not truly disclosed, he may reopen the assessment. This he may do either because fresh facts come to light which were not previously disclosed or because new light thrown on facts previously disclosed tends to expose the untruthfulness of such facts. Where subsequent information comes into the possession of the Income-tax Officer exposing the accounts as false, the Income-tax Officer is not precluded from reopening the assessment. It would not be a case of mere change of opinion as a result of drawing a different inference from the same facts. It would be a case where the Income-tax Officer has reason to believe, on the basis of subsequent information, that the assessee had failed to disclose material facts truly.'
11. O. Chinnappa Reddy J, (who is now adorning the Bench of the Supreme Court), who wrote the judgment, and with whom the other learned judge agreed after interpreting the case law on the subject, came to the sameconclusion as we have arrived at and, with respect, we agree with the view expressed by him. The learned judge categorically came to the conclusion that the decision of the learned single judge of this court in Karam Chand Kakkar v. ITO was correct but the reasons given therein were not tenable. We respectfully agree with this observation. It may be pointed out at this stage that a learned single judge of this court in Karam Chand Kakkar's case, held that the ITO, in that case, had changed his opinion on account of subsequent information which had come into his possession and thus that was a case of change of opinion. Whether on the facts so disclosed by the assessee, the ITO has made an investigation or not, that, in our opinion, will not relieve the assessee of the liability to disclose fully and truly all material facts necessary for the assessment in question.
12. Shri. Bhagirath Dass pointed out that the judgment of the learned single judge in Karam Chand Kakkar's case was affirmed by a Division Bench as the Letters Patent Appeal was dismissed. In our view the reasons given therein have rightly been held to be untenable by a subsequent Division Bench in Hazi Amir Mohd. Mir Ahmed's case and we respectfully agree with the said observations. We may further observe that in Karam Chand Kakkar's case  93 ITR 198, the learned judge did not discuss the import of the word 'truly' occurring in Section 147(a) of the Act.
13. The learned counsel for the petitioner has relied on the decisions of the Supreme Court in CIT v. Burlap Dealers Ltd. : 79ITR609(SC) and ITO v. Madnani Engineering Works Ltd. : 118ITR1(SC) , in support of his contentions. We have carefully gone through the said authorities and we are of the opinion that the said decisions nowhere lay down that even if the assessee has failed to disclose fully and truly all material facts necessary for the assessment, yet if the return had been accepted after due investigation, the reassessment proceedings could not be initiated under Section 147(a) of the Act. On the facts of Burlop Dealers' case : 79ITR609(SC) , their Lordships came to the conclusion that the assessee had disclosed his books & account and evidence from which material facts could be discovered, and it was under no obligation to inform the ITO about the possible inferences that might be raised against him. It was for the ITO to raise such an inference and if he had not done so in the original assessment, the income that escaped assessment could not be brought to tax under Section 34(1)(a) of the Act. That was a case where on facts it was found that the assessee has disclosed fully and truly all material facts and the ITO having drawn a particular inference could not, by change of his mind, subsequently initiate the proceedings under Section 34(1)(a) of the Act against the assessee for reassessment. Similarly, in Madnani Engineering Works' : 118ITR1(SC) , we do not find that the proposition of law, as has been propounded before us, has been laid down by their Lordships of the Supreme Court. In that case, the respondent was assessed to income-tax for the assessment year 1959-60, and certain interest paid by the respondent to creditors from whom it claimed to have borrowed monies on hundis, was allowed as deductible expenditure. The assessment was Completed and thereafter after the expiry of more than four years, the assessment was sought to be reopened under Section 147(a) of the Act. Consequently, the Division Bench of the High Court took the view that there was no failure on the part of the respondent to disclose fully and truly all material facts and in any event there was no material on the basis of which it could be sought that the ITO had reason to believe that any part of the income had escaped assessment. The Division Bench of the High Court allowed the writ petition. This decision was upheld by their Lordships of the Supreme Court in appeal. On facts their Lordships came to the conclusion that the assessee was not guilty of suppression of facts which he disclosed fully and truly. Their Lordships further recorded a finding that the belief of the ITO was based on no material as their Lordships refused to rely on the affidavit of the ITO and in these circumstances the judgment of the High Court was upheld. The proposition sought to be put up before us now, that even if the facts disclosed by the assessee are not truly disclosed, yet in a given case, the provisions of Section 147(a) of the Act will not be applicable, was nowhere laid down by their Lordships of the Supreme Court in that case.
14. We may also make mention of a judgment of the Bombay High Court in Shriyans Prasad Jain v. R.K. Bhalla, ITO : 94ITR34(Bom) , wherein the learned judges held that on facts it was shown that the assessee was guilty of suppression of material facts which were not fully and truly disclosed and thus the initiation of the reassessment proceedings under Section 147(a) of the Act was valid.
15. For the reasons recorded above, we are unable to agree with the abstract proposition of law, as has been propounded by the learned counsel for the petitioner, which has been succinctly stated in the earlier part of the judgment.
16. As regards the question, whether in view of the facts and circumstances of the case, the issuance of the impugned notice under Section 147(a) of the Act is without jurisdiction or not, we have already reproduced in extenso the relevant averments made in the return. At the time of hearing, the learned counsel for the revenue produced the relevant records before us. The learned counsel for the revenue made a reference to the statements of Ashok Kumar Gola Chand, Meghraj Sewaram, Meghraj Vasudev, Ramchand Meghraj. All the statements were recorded before the impugned noticewas issued to the petitioner. In the statements recorded, the persons mentioned above clearly stated that all the loans shown against their names were bogus and they did not in fact advance any loan from their own pockets. The statements contain the detailed procedure which was being followed in connection with the havala hundis. Furthermore, in the return, a portion of which has already been reproduced in the earlier part of the judgment, it has been categorically averred that the matter was investigated with regard to the petitioner's dealings with these five parties and it was found that this was a clear case of escapement of income through deliberate concealment on the part of the assessee.
17. The contention of Shri Bhagirath Dass, the learned counsel for the petitioner, that in the statements of the persons referred to in the earlier paragraph of the judgment, there is no reference of the name of the petitioner's firm and, therefore, the said statements should be taken to be not relevant material, is without any merit. When the bogus havala Hundi proprietors, namely, Meghraj, etc., in categorical terms stated that they did not advance loans to any person whatsoever, it would automatically mean that no loan was advanced to the petitioner and the loans shown in their names were in fact bogus transactions brought on the record. It is not necessary for the department to have further put questions qua each of the persons and against whom bogus loans were shown in the names of bogus havala hundi dealers. It is well settled that it is not for us to see the adequacy or inadequacy of the material but so long the relevant material is there before a notice is issued, this court in writ jurisdiction cannot hold that the notice issued is without jurisdiction.
18. For the reasons recorded above, we do not find any merit in this petition and the same is hereby dismissed. The authorities below shall proceed further with the reassessment proceedings in accordance with law. However, nothing said herein about the bogus transactions would entitle the authorities to draw any support as the case is only at the notice stage and it is for the assessee to satisfy the authorities on merits that no case is made out for reopening the assessment.
19. At this stage, the learned counsel for the petitioner makes an oral prayer for the grant of a certificate for leave to appeal to the Supreme Court. No case is made out for the grant of the requisite certificate. Leave is declined.
S.S. Dewan, J.
20. I agree.