G.K. Govinda Bhat, C.J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has stated a case and referred the following question for the opinion of this court :-
'On the facts and in the circumstances of the case, whether the Tribunal was justified in law in holding that Section 147(a) of the Income-tax Act, 1961, was attracted to the assessee's case ?'
2. The reference relates to the assessment year 1964-65. The assessee filed his return of income on 6-4-1964 declaring an income of Rs. 13,459 from his business in cardamom and profits from two other firms. The assessment was concluded on 18-9-1964. Subsequently, it came to the notice of the Department that the Assessee had Hundi transactions with some parties at Madras and at Bangalore. And the said parties had admitted before the Department that the transactions in Hundies were merely nominal transactions entered into to accommodate various parties for the purpose of introduction of their own monies in the shape of Hundi loans. On the basis of the said information, the Income-tax Officer, after issuing notice to the Assessee, reopened the assessment under section 147 of the Income-tax Act, 1961. He came to the conclusion that the alleged Hundi loans from five parties amounting to Rs. 1,20,000/- were not genuine, and, therefore, he added the said sum of Rs. 1,20,000/- as unexplained cash credits liable to tax as income from undisclosed sources and also a sum of Rs. 3,505/- alleged to be the interest paid on the said Hundi loans. On appeal to the Appellate Assistant Commissioner preferred by the Assessee, the income from undisclosed sources was reduced to Rs. 1,00,000/-. On second appeal, the Appellate Tribunal confirmed the addition of Rs. 50,000/- and set aside the assessment in respect of Rs. 50,000/- and remanded the matter to the Appellate Assistant Commissioner to re-examine two of the alleged creditors affording an opportunity to the Assessee to cross-examine them.
3. A contention had been raised before the Tribunal that reopening of the assessment under Clause (a) of section 147 was not justified. But the said contention was rejected by the Tribunal with the following observation :-
'The contention of the learned counsel for the assessee first was that the reopening of the assessment was not justified. However, in view of the Madras High Court ruling in 84 I.T.R. 53 the facts of which were more or less similar to the present case the learned Counsel did not press this point any further. We hold that the reopening under section 147(a) of the Income-tax Act, 1961, 'was fully justified in view of the ruling cited above.'
4. This reference is not concerned with the merits of the additions made by the Income-tax Officer and sustained by the Appellate Tribunal. The only question raised is whether the Tribunal is right in the view it has taken that Clause (a) of of Section 147 of the Act applies to the case.
5. Shri K. Srinivasan, learned counsel for the assessee, relying on the decision of the Supreme Court in Commissioner of Income-tax, Calcutta vs . Burlop Dealers Ltd. : 79ITR609(SC) , wherein chief Justice Shah, speaking for the court, held that the said case appropriately fell under Clause (b) of Section 34(1) of the Income-tax Act, 1922, urged that the instant case also falls under Clause (b) of Section 147.
6. Shri S. R. Rajashekhara Murthy, learned counsel for the Department contended that the case appropriately falls under Clause (a) of section 147 of the Act and in support of that contention, relied on several decisions of different High Courts.
7. Section 147 of the Income-tax Act, 1961, hereinafter called 'the Act', is in pari materia with Section 34 of the Income-Tax Act, 1922, after it was amended by Act 48 of 1948. Clause (a) of Section 147 of the Act; Clause (a) of Sub-Section (1) of Section 34 corresponds to Clause (b) of Section 147 of the Act; Clause (b) of Sub-Section (1) of Section 34 corresponds to Clause (b) of Section 147 Clause (a) and Clause (b) of Section 147 are mutually exclusive. Section 149 prescribes a time limit of 4 years for re-opening any assessment in cases falling under Clause (b) of Section 147, while a period of 8 years has been prescribed for cases falling under Clause (a). The condition required to be satisfied in order to give jurisdiction to the Income-tax Officer to re-open an assessment under Clause (a) of section 34 of the 1922 Act have been stated by the Supreme Court in Calcutta Discount Co. Ltd. vs . Income-tax Officer Company, District, Calcutta : 41ITR191(SC) which is the leading case on the subject. It has been laid down in that decision that in order to confer jurisdiction on income-tax Officer to issue notice under Clause (a) of Sub-section (1) of Section 34, two conditions have to be satisfied, viz., (1) that the Income-tax have reason to believe that such escapement has occurred by reason of either (1) omission of failure on the part of the assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Briefly stated, Clause (a) can be invoked where the Income-tax Officer has reason to believe that Income chargeable to tax has escaped assessment by reason of non-disclosure of all material facts necessary for assessment. What facts are material and necessary for assessment will differ from case to case. Once all the primary facts are before the Income-tax Officer, it is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have to be ultimately drawn; it is not for the assessee to tell the assessing authority what inferences, whether of facts or law, should be drawn. In view of the dictum of the Supreme Court in Calcutta Discount Co's Case (2) 41 I.T.R. 191 (SC) the power under Clause (a) or section 47 cannot be invoked if its is shown that the Assessee has made a complete and truthful-disclosure of all primary facts necessary for his assessment. The question therefore turns on the decision whether the Assessee has made a complete and truthful disclosure of all primary facts necessary for the assessment of his income.
8. In Govind Ram vs . Income-tax Officer, 'D' ward, Allahabad : 61ITR120(All) the question arose whether the case fell under Clause (b) or Clause (a) of Section 147. The assessment was for the year 1959-60. In the accounts of the assessee relating to the accounting year, a sum of Rs. 5,936/- was found credited on 1-11-1957. The assessee contended that the sum represented sale proceeds of ornaments and produced receipts for the sales. The Income-tax Officer did not accept that case, and holding that the said sum represented income from undisclosed sources and as such could not be included in the assessment year 1959-60 but should be assessed only for the assessment year 1958-59, left it out of account and later issued a notice on 15-5-1964 for reopening the assessment for the year 1958-59 under Section 147(a). This was challenged in a Writ Petition before the Allahabad High Court. It was held by Manchanda, J., that the case fell under Clause (b) of Section 147. This is what the learned Judge stated :-
'The primary facts in the case of a cash credit would be disclosure of the amount supported by receipts or documents to support the alleged source. The conclusion whether it in fact represents the sale of those ornaments or is income from an undisclosed source would be an inference to be drawn by the Income-tax Officer. IT is idle for the department to contend that the assessee himself should in the case of every cash credit admit, contrary to what he alleges, that the income was from an undisclosed source, otherwise he would render himself liable to action under Section 147(1) of the Act of 1961. In the present case, the petitioner had admittedly, according to the assessment order itself in respect of the original Assessment for the assessment year 1958-59, disclosed the existence of the said credit together with the receipts alleged to be from the sale of ornaments and there was nothing else which the petitioner could reasonably have been expected to disclose.'
9. In Seth Kirorimal Adwani vs . Income-tax Officer, 'E' Ward, Gauhati the assessee produced a statement showing the amounts taken on loan by him from different Hundi dealers during the accounting year 1957-58 and claimed deduction of interest paid to them and produced all evidence material and necessary for the purpose of assessment. The Income-tax Officer allowed the deduction. However, the Income-tax Officer served on 1-3-1966 a notice on the assessee under section 148 in respect of the said assessment year 1958-59 on the ground that it was found that the cash credits during the accounting year 1957-58 of more than Rs. 75,000/- in the names of a number of Hundi dealers were bogus and it was necessary to take action under Section 147(a). The assessee filed a Writ Petition in the Assam High Court to quash proceedings. It was held that as the primary facts as appearing from the return had been disclosed to the Income-tax Officer, the Assessee's conduct could not come within the ambit of Clause (a) of Section 147 and that on the facts, the case lay within the four corners of Clause (b) of Section 147. In Rai Singh Ded Singh Dist & Anr. vs. Union of India & Ors. 77 I.T.R. 803 , the Delhi High Court has taken the same view.
10. In Anne Nagendram and Nomma Reddy Venkayya & Co. vs . C.I.T., Andhra Pradesh : 66ITR46(AP) certain cash credits appearing in the accounts of the assessee were accepted by the Income-tax Officer as genuine. In consequence of the information received subsequently, action was taken under Section 34 of the 1922 Act to reopen the assessment was issued within 4 years held that it was a case of deliberate suppression and consequently attracted the provisions of Section 34 (a) (a) though that question did not arise because the assessment was reopened within 4 years. He, however, observed that it should not be understood that their Lordship were accepting the contention that even where the cash credits were examined by the Income-tax Officer, who accepted the explanation of the Assessee at the stage of the original assessment, the provisions of Section 34(1)(a) could be properly invoked if it is subsequently discovered by the Income-tax Officer that the cash credits were got up ones and not genuine.
11. In Lakshmi Melwal Das vs . Income tax Officer, 'I' ward, District VI & Others : 99ITR296(Cal) the reopening of assessment which was done after the expiry of the period of 4 years was challenged before the Calcutta High Court. The assessee had shown in his accounts that certain capital was borrowed from certain bankers on Hundies and that was accepted by the Income-tax Officer in making an order of assessment. Subsequently, the Department had information that the loans were not genuine. The Income-tax Officer issued notice to re-open the assessment. The case was heard by a full Bench of three Judges. Among others, on of the contention urged by Dr. Pal for the Assessee was that the case properly fell under Clause (b) of Section 147 of the Act and in support of his contention relied upon the decision in Burlop's case, (1). All the three learned Judges rejected the contention of the Assessee that the case fell under Clause (b) of Section 147. They give different reasons for distinguishing the case before them from Burlop's case (1).
12. The Madras High Court in Ardhanariswamy Chttiar & Others vs. First Income Tax Officer, Circle 1 Salem (8) I.T.R. 51 which is also case of Hundi loans, and assessment was sought to be re-opened after 4 years on the ground that the alleged loans were bogus, rejected the contention of the assessee that the case fell under Clause (b) and not under Clause (a) of Section 147.
13. The question is not free from difficulty as is obvious from the divergent views expressed by the several High Courts.
14. In the instant case, the question whether the case falls under Clause (a) or Clause (b) of Section 147 is purely academic as the notice under section 148 has admittedly been issued to the Assessee before the expiry of 4 years from the one of the relevant assessment year. The assessee's learned counsel Sri. K. Srinivasan did not contend circumstances of the case. His argument based on Burlop's case (1) was that the case appropriately fell under Clause (b) of the Section 147. Whether the case fell under clause (a) or Clause (b) of section 147 becomes material only when the notice under section 148 was issued after the expiry of four years. Where the notice is issued within the period of 4 years and the Assessee does not challenge that the reopening of the assessment was not justified, the question whether the case fell under Clause (a) or Clause (b) of Section 147 becomes the case falls under Clause (a) or Clause (b) of Section 147. In our opinion, the Tribunal therefore ought to have declined to made a reference.
15. Accordingly, we decline to answer the question referred as it is not necessary for the disposal of the case before the Tribunal on its merits. In the circumstances of the case there will be no order as to costs.