1. This is an appeal under clause 10 of the Letters Patent as applicable to this court from the judgment and order dated May 19, 1978 in C. W. No. 882/73. By the above order a learned single judge of this court (the present Chief Justice) quashed a notice issued by the ITO, the first appellant, under s. 148 read with s. 147 of the I.T. Act, 1961, dated March 28, 1970, and a second notice under s. 142 of the Act dated April 12, 1973, and also restrained the present appellants from taking any proceedings against the present respondent in pursuance of the notices quashed. The learned judge held that the conditions precedent for the issue of the notice under s. 148 of the I.T. Act, 1961, had not been fulfillled. It was common ground that the provisions of s. 147(b) were not applicable to the case in view of the lapse of time and the only question before the learned judge was whether the conditions precedent as set out in clause (a) of s. 147 had been fulfillled. This question was answered in the negative.
2. The judgment under appeal has been reported in Dwarka Dass & Bros. v. ITO : 118ITR958(Delhi) . It sets out the facts and circumstances of the case elaborately and the facts, thereforee, need not be repeated. The learned judge founded that the facts of the case were directly covered by two decisions of the Supreme Court : (1) Chhugamal Rajpal v. S. P. Chaliha : 79ITR609(SC) and ITO v. Lakhmani Mewal Das : 103ITR437(SC) . The department had relied on a decision of the Calcutta High Court in ITO v. Mahadeo Lal Tulsian : 110ITR786(Cal) and another of the Madras High Court in M. Varadarajalu Naidu v. CIT `. The learned judge pointed out that the interpretation placed by these judgments was contrary to the principles enunciated by the Supreme Court and in particular the decision in the case of Lakhmani Mewal Das : 103ITR437(SC) .
3. In the appeal it is contended on behalf of the appellants that the learned single judge had erred in applying the decision of the Supreme Court in ITO v. Lakhmani Mewal Das : 103ITR437(SC) . We are unable to accept this contention. Both the decisions of the Supreme Court referred to by the learned judge are directly in point. In both the cases assessments completed earlier were reopened under s. 147(a) for the purpose of including in the reassessments the amount of certain cash credits the genuineness of which had been accepted at the time of the original assessments. In the case Chhugamal Rajpal v. S. P. Chaliha : 79ITR603(SC) the assessed had produced at the time of original assessment full details regarding the creditors and the loans in question and the assessment was completed after enquiry. Thereafter the assessment was reopened because the ITO had received certain communications from the Commissioner from which it appeared that the creditors were mere name-lenders and the loan transactions were bogus. The ITO, thereforee, considered that proper investigation regarding the loans taken by the appellant was necessary had reopened the assessment. This was held to be unjustified.
4. In the later decision in the case of ITO v. Lakhmani Mewal Das : 103ITR437(SC) the original assessment had been similarly completed accepting the genuineness of certain cash credits and allowing the interest paid thereon as deduction. According to the report made by the ITO to the Commissioner setting out his reasons for reopening the assessment, two reasons were mentioned : (1) that one M. K., who was shown to be one of the creditors of the respondent had since confessed that he was doing only name-lending; and (2) that N. M., D. K. N., B. S. and others, whose names too were mentioned in the lists of the creditors of the respondent were know name-lenders. The Supreme Court, affirming the decision of the High Court, held that there was nothing to show that the confession of M. K. related to a loan to the assessed, much less to the loan which was shown to have been advance by that person to the respondent an the live link or close nexus which should be there between the material before the ITO and the belief which he was to form was missing or was, in any event, too tenuous to provide a legally sound basis for reopening the assessment. In regard to the second ground again, the Supreme Court held that it could not have led to the formation of the belief that the income of the respondent chargeable to tax had escaped assessment because of the failure of the assessed to disclose fully and truly all material facts.
5. The position in the present case falls within the same category. At the time of the original assessment all the facts relating to the case credits in question were fully disclosed. This has been found by the learned judge at page 960 (of 118 ITR) and indeed this is the accepted position on the basis of which even the proposal of the ITO to the Commissioner (set out at page 964) proceeded. Thereafter, the only material received by the ITO appears to be that the revenue authorities had carried out certain investigations, that they had discovered the existence of bogus hundi brokers who were allegedly lending their names to assesses and that a list had been circulated to various ITOs of the hundi brokers who were allegedly indulging in malpractices. The internal audit party appears to have discovered that some of the creditors whose credits had been accepted in the assessed's case fell within this category and raised an audit objection which was the immediate provocation for the reopening of the assessment. In this case also, as in the case before the Supreme Court, there is no live connection or link established between the information or the facts, in the possession of the ITO, and the genuineness of the particular loans recorded in the assessed's books. The mere fact that the names of some of the creditors figured in a list made out by the department would be too general and vague to lead to an inference regarding the truth or otherwise of the loans recorded by the assessed. We are wholly unable to find any material point of distinction between the facts of the present case and those considered by the Supreme Court in the case of Lakhmani Mewal as : 103ITR437(SC) .
6. On behalf of the appellants, as before the learned single judges, reference was made to the decisions of the Calcutta High Court in ITO v. Mahadeo Lal Tulsian : 110ITR786(Cal) and : 111ITR25(Cal) an the decision of the Madras High Court in the case of M. Varadarajulu Naidu v. CIT : 111ITR301(Mad) . We find that so far as the Calcutta cases are concerned, both of which related to the same assessed, they are clearly distinguishable in facts. In fact the Calcutta High Court applied only the principles laid down by a Full Bench of their own High Court which had been approved by the Supreme Court in the case of Lakhmani Mewal Das : 103ITR437(SC) . But on the facts it was pointed out that the position was different. It appears that in the case of that assessed the original assessment had been completed after that in the case of that assessed the original assessment had been completed after accepting certain cash credits. But, subsequently, in the courses of the subsequent assessments, the ITO investigated the matter and came to the conclusion that the said credits were not genuine. It is on the basis of the subsequent assessments that the earlier assessments were reopened. It is not quite clear from the judgment as to what exactly was the substance of the investigation carried out and what the facts revealed by this investigation were. At page 795 of the judgment it is seen that at the time of the original assessment the loans had been accepted as genuine without any verification. But subsequently it was found that the alleged loan credits included the credits in the names of certain parties who were subsequently found to be non-genuine. It, thus, appears that in the course of the subsequent assessment the ITO had gathered certain material on the basis of which he could conclude that the full and true facts had not been disclosed at the time of original assessment. If indeed there had been some facts disclosed at the time of the subsequent assessment then certainly the action under s. 147(a) was fully justified. It has been so held by a Bench of this court (which included one of us) in the Nawabganj Sugar Mills case : 123ITR287(Delhi) . If, however, no new facts had been disclosed and it was merely a case of reopening of an assessment consequent on the ITO having arrived at a different conclusion for the subsequent year in relating to the same matter on the same evidence, it would be difficult to pay, as pointed out by the learned single judge, that the provisions of s. 147(a) would apply particularly in view of the decisions of the Supreme Court in ITO v. Madnani Engg. Works Ltd. : 118ITR1(SC) . It is unnecessary to go into that question because, as we have pointed out, so far as the present case is concerned, the assessment is not being sought to be reopened on the basis of any investigation carried out by the ITO nor is there any material which establishes a close nexus or live link that shown escapement of assessment.
7. The decision of the Madras High court in M. Varadarajulu Naidu v. CIT : 111ITR301(Mad) also turned on its own facts. in that case it was found that at the time of original assessment the assessed had not placed any facts relating to the hundi transactions in question, but had merely filed certain statements and the finding of the Tribunal that there was no disclosure of the material facts at the time of original assessment was the basis on which the judgment proceeded. It is also interesting to see that in that case the assessed did not challenge the reassessment on the merits, but only challenged the validity of the proceedings taken for reassessment. Since, at the time of original assessment there had been no disclosure at all, the learned judges came to the conclusion that the subsequent information received by the ITO was enough to justify action under s. 147(a).
8. We have, thereforee, come to the conclusion that, for the purpose of the case before us, it is not necessary to express any opinion as to whether the decision of the Calcutta High Court and Madras High Court relied upon by the appellants are consistent with the principles laid don by the Supreme Court or whether they would need any reconsideration, particularly in the light of the later decision of the Supreme Court in ITO v. Madnani Engg. Works Ltd. : 118ITR1(SC) .
9. We may also mention that, as already stated, the immediate provocation of the reassessment in this case was the report of an audit party and, as held by the Supreme Court in Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) , such report on a point of law may not constitute information within the meaning of s. 147(b). This is a case where action was been taken under s. 147(a) in which clause the word 'information' does not occur and, moreover, this is a case where the ITO had received information as to facts. If there had been any material connecting the specific credits in the assessed's books and leading to an inference of their non-genuineness, the position may be different. But where, all that the ITO had got, is some general information that certain creditors are not genuine money-lenders but only name-lenders and there is nothing to connect the particular such credits appearing in the books of the assessed with any definite statement or confession of the like made by the creditor or someone else in respect of the assessed's transaction specifically in question, it is not possible to hold that the conditions precedent for action under s. 147(a) had been fulfillled.
10. For the above reasons, we are in entire agreement with the learned judge and dismiss this appeal. The respondent will be entitled to its costs; counsel's fee Rs. 300.