Anil K. Sen, J.
1. This is an appeal under Clause 15 of the Letters Patent preferred by the revenue and it is directed against the judgment and order dated March 22, 1974, passed by A. K. Mookerji J, in Civil Rule No. 607(W) of 1971 [Mahadeolal Tulsyan v. Income-tax Officer : 110ITR637(Cal) ], whereby the learned judge set aside a notice under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as the 'said Act'), and quashed all proceedings initiated thereon.
2. Messrs. Calcutta Hardware Store, of which the sole respondent is a partner, was assessed to income-tax for the assessment year 1961-62 on a total income of Rs. 87,227 by the Income-tax Officer, 'I' Ward, Hundi Circle, Calcutta, on February 22, 1962. At the said assessment the assessee-firm filed copies of their accounts including the profit and loss account, balance-sheet and loan account. Such loans obviously included a number of hundi loans and the assessee-firm also claimed credit for the interest alleged to have been paid on such loans. The Income-tax Officer making the assessment accepted the loans to be genuine and granted credit for the interest alleged to have been paid on such loans. On March 30, 1970, the successor-in-office of the Income-tax Officer, ' I ' Ward, Hundi Circle, Calcutta, issued the impugned notice under Section 148 of the said Act proposing to reassess the income for the' said year 1961-62 on the ground that he had reason to believe that the assessee's income chargeable to tax for the assessment year 1961-62 had escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961. The notice further recited that such a notice was being issued on obtaining the necessary satisfaction of the Commissioner, of Income-tax, West Bengal-I. The respondent disputed the validity of such a notice under Section 148 and the proceedings for reassessment based on such a notice in a writ petition on which the above rule was issued. According to the respondent the impugned notice was not based on any seasonable belief and, in any event, there were no materials on which any such bona fide belief could have been arrived at by the Income-tax Officer when he proceeded to issue the impugned notice. It was further claimed by the respondent that there was full, fair and true disclosure of all basic facts including the hundi loans at the time of the original assessment and the Income-tax Officer making the assessment accepted such loans to be genuine and allowed the claim of interest paid on such loans to the creditors. The successor-Income-tax Officer, according to the respondent, could not have lawfully initiated the proceedings for reassessment on a notice under Section 148 merely on a different opinion being entertained by him in regard to the said loan transactions. It is further claimed that there was no valid and lawful satisfaction on the part of the Commissioner of Income-tax under Section 151(2) of the said Act, and, as such, the impugned notice was clearly beyond the sanction of law.
3. In contesting the aforesaid writ petition, the Income-tax Officer filed an affidavit, in paragraph 6 whereof he stated :
' At the time of the original assessment the assessee-firm filed somecopies of accounts including profit and loss account, balance-sheet and loanaccount but the said loan account did not include the list of hundi loans.Subsequently, during the course of assessment for the year 1964-65 completed on 28th August, 1968, and also for the assessment year 1965-66 it wasfound by the Income-tax Officer that the assessee introduced cash credits inthe form of hundi loans which were not genuine as there was no confirmation either of the parties advancing the loans nor any other evidence aboutthe loan transaction was furnished and produced before the assessingIncome-tax Officer. Therefore, I deny that the facts relevant to the saidassessment year were fully and truly disclosed and brought to the knowledge of the Income-tax Officer making the assessment as alleged in 1961-62and it came to light in the course of assessment for the year 1964-65 and1965-66 that the hundi loans were not genuine.' Such was the case forissue of the impugned notice made by the Income-tax Officer in hisopposition wherein he disputed the claim of the respondent that at thetime of the original assessment there was full and true disclosure of allthe facts and he further denied the suggestion that the impugned notice hadbeen issued merely tiased on a change of opinion. It was further disputedthat the satisfaction recorded by the Commissioner was not in accordancewith law.
4. In a reply filed, by the respondent there was a categorical denial that,at the time of the original assessment, the assessee-firm had not disclosed thelist of hundi loans. On the other hand, it was specifically asserted that allloans were truly and faithfully disclosed to the Income-tax Officer makingthe original assessment and he having accepted the same to be genuine itwas not open to the successor to say that they are not so and thus toinitiate the proceeding for reassessment.
5. The learned judge in the trial court appears to have accepted the case of the respondent that the hundi loans were disclosed by the assessee-firm at the time of the original assessment. On acceptance of such a case the learned judge proceeded to hold that there being no omission or failure on the part of the assessee to disclose truly and fully the material facts at the time of the original assessment and the Income-tax Officer having accepted such loans as genuine with due knowledge of such facts, the successor-Income-tax Officer, when he formed the belief that such hundi loans were not genuine, was merely changing his opinion and a mere change in the opinion does not entitle the Income-tax Officer to either issue a notice under Section 148 or initiate a proceeding for reassessment under Section 147 of the said Act. This was the principal reason on which the learned judge in the trial court proceeded to set aside the notice and quashed the proceeding for reassessment. Incidentally, however, he further held that the copy of the reasons which was not disclosed in the affidavit of the Income-tax Officer but which was produced before him from the original records being cyclostyled it must be held that the Income-tax Officer never applied his mind and arrived at any bona fide belief. On such findings, the learned judge allowed the writ petition and made the rule absolute by the judgment and order under appeal and feeling aggrieved thereby the revenue and its authorities have come up in appeal.
6. Mr. Pal appearing on behalf of the appellant has strongly assailed the conclusion of the learned judge in the trial court to the effect that, on the facts and circumstances, the impugned notice under Section 148 of the said Act was issued merely on a change of opinion in respect of the transactions by the successor-Income-tax Officer. On the other hand, he has strongly contended that subsequent facts well establish the position that the assessee-firm never made a true disclosure of facts when certain cash credits were misrepresented as hundi loans and such misrepresentation having been found in the course of assessment for subsequent years, the Income-tax Officer had lawful authority to initiate a proceeding for reassessment for the previous year when a part of the concealed income were passed off as fictitious loans and had escaped assessment. Mr. Pal has further contended that though recorded in a cyclostyled manner, facts will establish application of mind by the Income-tax Officer to the facts of the individual case and, as such, it could not have been held that the Income-tax Officer never arrived at any bona fide belief in issuing the show-cause notice.
7. Mr. Baner jee appearing on behalf of the sole respondent has contested all the points raised by Mr. Pal. According to Mr. Banerjee the Income-tax Officer, as it appears from his affidavit, proceeded on wrong premises that the assessee-firm had Hot disclosed the hundi loans at the time of the original assessment and thus concealed a part of its income which when found out could furnish valid grounds for reassessment. Secondly, it has been contended by Mr. Banerjee that the hundi loans having been disclosed it was for the Income-tax Officer making the original assessment to find whether they are genuine or not and when they were accepted as genuine by the said officer, it is not open to the successor to hold a different view and initiate a proceeding for reassessment. Mr. Banerjee has further supported the conclusion of the learned judge in the trial court that, in any event facts will establish the position that there was no application of mind by the Income-tax Officer when he proceeded to initiate the proceeding for reassessment and on the other hand he merely signed a set and cyclostyled record of reasons and thus proceeded mechanically which is not within the sanction of law.
8. What are the requirements of Sections 147 and 148 of the said Act which correspond substantially to Section 34 of the old Act of 1922 have been the subject-matter of judicial decisions in a number of cases. The point has been considered by the Supreme Court itself in a number of cases starting from Calcutta Discount Co. v. Income-tax Officer : 41ITR191(SC) . The principle evolved appears to me to be well-settled on such decisions of the Supreme Court. The Income-tax Officer acquires jurisdiction to proceed under Section 147(a) read with Section 148 of the said Act only where he arrives at a positive conclusion that he has reason to believe that by reason of the omission or failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for his assessment, any part of his income, profits or gains chargeable to income-tax has escaped assessment. The belief being that of the Income-tax Officer, it is not open to the assessee to dispute the propriety thereof by disputing the sufficiency of the feasons, though it is always open to the assessee to claim that there exists no belief or that the belief is not at all a bona fide one. To the limited extent, as aforesaid, the conclusion of the Income-tax Officer is open to challenge in a court of law and, in considering whether the belief is a bona fide one or not, the court can examine whether there exists any material for the belief to be formed with reference thereto and whether such materials have any rational connection or relevant bearing on the formation of the belief and are not extraneous or irrelevant to the particular belief specified in the Section (see S. Narayanappa v. Commissioner of Income-tax : 63ITR219(SC) reaffirmed in Kantamani Venkata Narayana & Sons v. First Addl. Income-tax Officer : 63ITR638(SC) . To bring it within Section 147(a) escapement of the assessment mast, however, always be due to the assessee's omission or failure either to make a return or to disclose fully and truly all material facts necessary for his assessment. If the assessee has discharged his obligation and has submitted a return and has also made a full and true disclosure of all material facts but even then if there had been any escapement of assessment due to any error, omission or failure on the part of the Income-tax Officer making the assessment, such escapement of assessment could be no ground for initiation of a proceeding under Section 147(a) of the Act. Similarly, where the assessee has discharged his obligations, as aforesaid, and has been subjected to an assessment, any change of opinion by a successor-Income-tax Officer taking a different view of the law or making a different inference from facts disclosed, which leads the Income-tax Officer to conclude that there had been an escapement of assessment, would not also furnish any ground for initiation of a proceeding under Section 147(a) of the said Act.
9. Applying the test, as aforesaid, to the facts of the present case we are unable to agree with the first conclusion arrived at by the learned judge in the trial court. On the materials now before us we agree with the learned judge in the trial court that the assessee did disclose the hundi loans in the original assessment proceeding. An assertion to the contrary in the affidavit of the Income-tax Officer is clearly incorrect in view of the uncontroverted disclosure made in annexure ' A ' series in the writ petition. Exhibit A-2 goes to show that the list of hundi loans were disclosed at the time of the original assessment. But such fact by itself does not lead to the other conclusion that escapement of assessment, if any, was merely the result of a different view taken by the successor-Income-tax Officer. The assessee was required not only to make full disclosure of all facts relevant to the assessment but also a true disclosure thereof. The facts that led the successor-Income-tax Officer to initiate the impugned proceeding for assessment are, according to him, that the assessee originally did not make true disclosure of relevant facts; a number of cash credits were represented by him as loans and what were really income, passed off as loans and these escaped assessment. If the Income-tax Officer on relevant materials had reasons to believe as such it would clearly come within Section 147(a) of the Act. It is wholly immaterial for us now to consider whether the Income-tax Officer making the original assessment could or could not have found the same to be faked or not. When the successor-Income-tax Officer arrived at a conclusion that the assessee concealed a part of his income by falsely representing the same as loan at the time of original assessment which was subsequently found, out by him, he was certainly not proceeding merely on change of his opinion or view. On the other hand, he was proceeding on actual facts as subsequently found out leading to the conclusion that a part of the income escaped assessment due to untrue disclosure of material facts. It is not a case where the assessee having made a full and true disclosure of facts the two Income-tax Officers are arriving at two different conclusions taking either two different views of law or facts truly and fully disclosed or making two different inferences therefrom. Nor is it a case where there having been a full and true disclosure of all relevant facts a part of the income is subsequently found to have escaped assessment due to any error or omission or failure on the part of the Income-tax Officer making the assessment on the facts truly and fully disclosed or found out in the course of the original assessment. This being the position, we are unable to agree with the learned judge of the trial court that, in the facts and circumstances of the present case, the impugned proceeding for assessment was initiated by the Income-tax Officer based purely on change of his opinion or that reasons disclosed do not bring the case within the sanction of Section 147(a). This view of ours is well supported by the Full Bench decision of this court in the case of Lakhmani Mewal Das v. Income-tax Officer : 99ITR296(Cal) [FB], where it was clearly pointed out that ' the truth or falsity of a bare proposition can never be the subject-matter of an inference from the proposition itself or from false materials created to justify the proposition.'
10. Mr. Banerjee, appearing on behalf of the respondents, has, however, strongly contended that, on the materials disclosed, the Income-tax Officer could not have at all formed any bona fide belief that the loans were not genuine or that any part of the respondent's income for the relevant period has escaped assessment due to any untrue disclosure of facts. Strong reliance has been placed on the Full Bench decision of this court above referred to and the two decisions of the Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha : 79ITR603(SC) and Income-tax Officer v. Lakhmani Mewal Das : 103ITR437(SC) . In the latter case, the Supreme Court affirmed the above Full Bench decision of this court.
11. In Chhugamal's case : 79ITR603(SC) the reason assigned by the Income-tax Officer was that the assessee at the time of original assessment had shown certain loans from certain persons who, on subsequent information, appeared to be name-lenders. 'Hence proper investigation is necessary.' The Supreme Court found that the particulars of the information were not disclosed, the Income-tax Officer himself had not arrived at any definite belief on such information when he merely concluded that creditors appear to be name-lenders and that it is necessary to make a proper investigation in respect of such loans. On such a finding the Supreme Court concluded : ' We are not satisfied that the Income-tax Officer had any material before him which could satisfy the requirements of either Clause (a) or Clause (b) of Section 147.'
12. The position is similar in the case of Lakhmani's case : 103ITR437(SC) . There the Income-tax Officer assigned two grounds. One was that one Mohan Singh Kanayalal, who was shown to be one of the creditors of the assessee, had since confessed that he was doing only name-lending. The other ground was that three named persons whose names too were mentioned in the list of creditors of the assessee were known name-lenders. So far as the second ground was concerned, all the three learned judges constituting the Full Bench in this court and the Supreme Court held that the same did not stand in a better footing than the ground in Chhugamal's case : 79ITR603(SC) . So far as the first ground is' concerned, the majority of the learned judges in this court found that the confession referred to therein in the absence of any particulars cannot be related to the assessee's loan for the particular year. The Supreme Court affirmed the said conclusion. The Supreme Court held that the live link or close nexus which should exist between the material before the Income-tax Officer and the belief which he was to form was missing or in any event too tenuous to provide a legally sound basis for reopening the assessment in the first ground and, so far as the second ground is concerned, the same could not have led to the formation of the belief as contemplated by Section 147(a).
13. In these two cases the Supreme Court and the Full Bench of this court reaffirmed the principles we have referred to hereinbefore but, in applying those principles, held, on facts, either that the Income-tax Officer had not formed any bona fide belief or that the materials on which the belief was based was such that no belief could reasonably be formed on such materials. In our view, the principles to be applied being well-settled, whether the Income-tax Officer had formed any bona fide belief or not or whether the materials on which he has proceeded could reasonably furnish any foundation for the belief, would always depend on the particular facts of each case. It would be a matter for the court to decide on a consideration of all relevant facts and circumstances of each case. Now, in the present case, the reason assigned by the Income-tax Officer as given in his report to the Commissioner is as follows :
' It appears from the records that the assessee obtained hundi loans from various parties during the relevant year. These loans are found to have been accepted in the original assessment as genuine as claimed by the assessee without making any verification. Now, it transpires that the alleged loan credits also include certain credits in the name of, (1) Girdhari Sihgh J. Singh, (2) Kanayadass Hotchand, (3) Govindaram Nichaldas, etc., which have subsequently been found to be not genuine. Therefore, I have reasons to believe that the loans in question are not genuine and these are the assessee's concealed income which has escaped assessment on the assessee's failure to disclose truly and fully all materials facts that were necessary for its original assessment.'
14. Reading the reason thus assigned with the affidavit of the. Income-tax Officer, it is well-established that certain transactions which were represented as loans at the time of original assessment were believed to be not genuine when similar transactions with the same persons in the succeeding two years were found to be not genuine. This led to further belief that, due to such misrepresentation, a part of the concealed income of the assessee had escaped assessment. Here, in this case, the Income-tax Officer is firm in his conclusion that he has reason to believe that the loans are not genuine, and these represent really the concealed income of the assessee which escaped assessment. Materials on which he formed such a belief are the facts found in two subsequent assessments and those materials, in our opinion, reasonably justify the belief because, in subsequent assessments of the assessee, similar transactions with same persons were found to be not genuine transactions of loan. At the stage of issue of the notice under Section 148 the Income-tax Officer is not to come to any conclusive finding as to whether the loans are genuine or not; he is merely to form a reasonable belief that they are not genuine. Such a belief can reasonably be formed, in our view, on the materials as aforesaid which were considered by the Income-tax Officer in forming the belief. Hence, we find no merit in this contention of Mr. Banerjee and the decisions relied on by him do not help him on the particular distinguishable facts of this case. For the same reason the decisions of the Supreme Court in the case of Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax : 82ITR147(SC) and Union of India v. Rai Singh Deb Singh Bist : 88ITR200(SC) are distinguishable and they do not help the respondent in the present case.
15. We are also unable to agree with the learned judge in the trial court that the Income-tax Officer did not arrive at any bona fide belief as required by Section 147(a) when he issued the impugned notice. A copy of the report containing the reasons has been filed with an affidavit filed in the appeal. Unfortunately, there is a typographical error in the copy so filed in respect of item No. 8 which is left blank in the copy filed along with the affidavit though the original produced records an endorsement to the effect: 'Yes, I am satisfied'. The learned ludge in the trial court is right in his finding that the reasons recorded in the separate sheet are recorded in a cyclo-styled form. Though we agree with the learned judge in his conclusion that in recording the belief the Income-tax Officer must do so in a bona fide manner and cannot prdceed to do so in a mechanical manner, yet from the mere fact that the reasons have been recorded in a cyclostyled manner, we are unable to conclude, as has been concluded by the learned judge in the trial court, that there had been no application of mind by the Income-tax Officer or that he has proceeded in a mechanical manner. Cyclostyling the reasons might have been a necessity for very many reasons. That alone does not render the act mechanical (S.K. Ibrahim v. State of West Bengal : 1974CriLJ657 ). In the present case the reason itself as recorded goes to show that certain loan credits, particulars whereof have been set out in the reason itself, are stated to be not genuine. Those loan credits are all related to the original assessment. Thus, it was not a case of a cyclostyled record of a part of a statutory provision. The very reference to particular facts having a bearing on a particular assessment would go to show that the Income-tax Officer did apply his mind to the facts of the individual case in recording such a reason. No doubt, in specifying the particulars of the loan credits, the Income-tax Officer set out the names of three only out of the hundi creditors using thereafter the expression ' etc.' But that too, in our opinion, does not betray any lack of proper application of mind. He was recording the reason in brief so that he thought it sufficient to name three of such creditors and not all. This being the position, though we are in agreement with the principle enunciated by the learned judge in the trial court in this respect, we are unable to agree with him that, on facts, there had been any infringement of the said principle. On the conclusions as above, we cannot but set aside the judgment and order of the learned judge under appeal.
16. Before doing so, however, we must dispose of a short point-raised by Mr. Banerjee on behalf of the respondent. He has contended that there had been no due compliance with the provisions of Section 151(2) of the said Act since the Commissioner of Income-tax had failed to arrive at a bona fide satisfaction or record the same. Here again, the issue has to be considered from the point of view of what the facts establish in substance. Now, facts indicate that the proposal for reopening the assessment with reasons indicated hereinbefore was placed before the Commissioner of Income-tax. Obviously he applied his mind as is indicated by his endorsement : ' Yes, I am satisfied.' If the Commissioner records his satisfaction in a positive manner, as aforesaid, and there being no other material before us to show that notwithstanding such a record the Commissioner never applied his mind but merely signed on a dotted line without application of his mind, we are unable to accept the contention that the Commissioner never arrived at a bona fide satisfaction in recording the same. This objection raised by Mr. Banarjee, therefore, must fail and is overruled.
17. On the conclusions as above, this appeal succeeds and is allowed. The judgment and order passed by the learned judge are set aside. The writ petition of the respondent fails and is dismissed. The rule obtained by him is discharged. In the facts and circumstances, we direct that the parties do bear their costs throughout.
18. Let the operation of the order remain stayed for three weeks after Puja vacation.
M.N. Roy, J.
19. I agree.