1. In this reference petition, the Revenue seeks a direction from this court to the Tribunal under s. 256(2) of the I.T. Act, 1961, to refer the following two questions for the opinion of this court :
'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that there was no non-disclosure on the part of the assessee of the primary facts relating to the 'deemed dividends' assessable under section 2(22)(e) of the Income-tax Act, 1961, and therefore, there was no case for the Income-tax Officer to initiate proceedings under section 147(a) of the Income-tax, 1961
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the Income-tax Officer had assumed jurisdiction under section 147(a) of the Income-tax Act, 1961, without having adequate supporting materials to entertain the belief that income had escaped assessment ?'
2. However, we find that, on the facts and in the circumstances of this case, the decision taken by the Tribunal in this case appears to be consistent with the legal position.
3. The assessee was assessed under s. 143 of the I.T. Act, 1961, for the assessment year 1967-68 by an order dated October 27, 1971. Later on, the ITO is said to the have noticed that Messrs. P. S. S. Investments (Private) Ltd., a company in which the assessee has a substantial interest, had advanced amounts aggregating to Rs. 60,015 to the assessee during the previous year relevant to the assessment year 1967-68. The ITO has also noticed that the said company had accumulated profits amounting to Rs. 54,015 as on March 31, 1967. Based on these two factors, the ITO held that a sum of Rs. 54,015 should be included in the total income of the assessee as deemed dividend under s. 2(22)(e) of the assessee in the return of income filed by him, the ITO felt that it had escaped assessment and, therefore, he initiated proceedings under s. 147(a) and brought to charge the said sum of Rs. 54,015 as deemed dividend. Against the initiation of proceedings under s. 147(a), the assessee filed an appeal to the Commissioner of Income-tax (Appeals) contending that s. 147(a) is inapplicable to the facts of this case, that the loan taken by the assessee from Messrs. P. S. S. Investments (Private) Ltd. was brought to the notice of the ITO even at the stage of the original assessment and that the advance made by the said company to the assessee was in the normal course of money-lending business. The Commissioner of Income-tax (Appeals) examined the first contention of the assessee regarding the validity of the proceedings under s. 147(a) and held that the assessee was under no obligation to disclose in his return the income which became part of the total income only by virtue of a fiction of law. He relied on the decision of the Supreme Court in Muthiah Chettiar v. CIT : 74ITR183(SC) , and held that the ratio of the said decision of the Supreme Court was applicable to the facts of the present case. He also held that the statutory return of income did not require that deemed income under s. 2(22)(e) should be disclosed in the return of income and, therefore, there was no failure on the part of the assessee to disclose the material facts. He, accordingly, held that s. 147(a) was not applicable and, hence, the order passed under that section had to be cancelled.
4. The matter was taken by the Revenue before the Income-tax Appellate Tribunal. The Tribunal also substantially agreed with the Commissioner of Income-tax (Appeals) and held that the proceedings initiated by the ITO under s. 147(a) could not legally be substained.
5. We are of the view that the Commissioner of Income-tax (Appeals) and the Tribunal have come to the right conclusion in this regard. In the present case, the balance-sheet of the assessee filed during the original proceeding disclosed a loan from Messrs. P.S.S. Investments (Private) Ltd., which is a company carrying on the business of money-lending. The fact that the said company possessed accumulated profits could also be gathered from the records of the company. When the borrowing of the funds by the assessee from the company and the availability of accumulated profits in the hands of the company had been made known to the ITO, the assessee could not be said to be guilty of non-disclosure of primary facts. As has been held by the Supreme Court in Calcutta Discount Co. Ltd. v. ITO : 41ITR191(SC) , the duty of an assessee is only to disclose primary facts including the entries in the account books and his duty does not extend beyond the full and truthful disclosure of primary facts. Once all the facts necessary for the completion of an assessment are made available to the ITO, it was not for the assessee to tell the ITO as to what inferences should be drawn from those facts. The learned counsel for the Revenue would say that the fact whether the company lent money to the assessee in the normal course of its business or not was not brought to the notice of the ITO and that it is the duty of the assessee to show that his loan transaction was in the normal course of the business of the company. Here again it is for the ITO to have investigated the question as to whether the company advanced loan to the assessee in the normal course of its business of money-lending, when the factum of the company lending money to the assessee was brought to his notice. It appears from the order of the ITO that he did not examine at the original stage whether or not the loan was in the ordinary course of business. As already stated, the duty of the assessee is only to disclose all primary facts necessary for completing the assessment and it is not for him to compel the ITO to investigate matters arising out of the primary facts disclosed.
6. In this view, no reference is called for in this case. This reference petition is, accordingly, dismissed. There will be no order as to costs.