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Ratanlal Mohta and Sons Vs. Income-tax Officer, c Ward and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 12565(W) of 1976
Judge
Reported in[1984]148ITR246(Cal)
ActsIncome Tax Act, 1961 - Sections 147 and 149
AppellantRatanlal Mohta and Sons
Respondentincome-tax Officer, "c" Ward and ors.
Appellant AdvocateAnil Kanti Roychowdhury, ;Bijoy Krishna Dutta and ;Dipti Sinha, Advs.
Respondent AdvocateAjit Kumar Sen Gupta and ;Rupendra Nath Mitra, Advs.
Cases ReferredChhugamal Rajpal v. S.P. Chaliha
Excerpt:
- m.n. roy, j.1. sarvashree ratanlal mohta, hanumandas mohta, basanta kumar mohta and suresh kumar mohta having equal shares, formed a partnership, viz., the petitioner firm, for the purpose of carrying on the business of purchase and sale of rice and paddy, apart from manufacturing and selling of plastic goods. it has been stated that for the assessment year 1960-61 corresponding to 2015-16 dewali (hereinafter referred to as 'the said assessment year'), the petitioner firm was assessed by the ito, b-ward, district 24-parganas, being respondent no. 2, who at the material time was one h. v. upadhyay, under section 23(3) read with section 23(5)(a) of the indian i.t. act, 1922 (hereinafter referred to as the 'said 1922 act'), and the total income was computed at rs. 7,671. such fact, excepting.....
Judgment:

M.N. Roy, J.

1. Sarvashree Ratanlal Mohta, Hanumandas Mohta, Basanta Kumar Mohta and Suresh Kumar Mohta having equal shares, formed a partnership, viz., the petitioner firm, for the purpose of carrying on the business of purchase and sale of rice and paddy, apart from manufacturing and selling of plastic goods. It has been stated that for the assessment year 1960-61 corresponding to 2015-16 Dewali (hereinafter referred to as 'the said assessment year'), the petitioner firm was assessed by the ITO, B-Ward, District 24-Parganas, being respondent No. 2, who at the material time was one H. V. Upadhyay, under Section 23(3) read with Section 23(5)(a) of the Indian I.T. Act, 1922 (hereinafter referred to as the 'said 1922 Act'), and the total income was computed at Rs. 7,671. Such fact, excepting the amount was admitted, and the assessment in question was made on September 5, 1960, on a total income of Rs. 13,962 taking the status of the assessee as a registered firm. The income as computed has been stated to be Rs. 7,571 by the answering respondents.

2. Thereafter, a notice dated September 21, 1976, as issued under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as ' the said Act'),was served on the petitioner, asking it to furnish a return within 30 days from the date of service of notice, as the ITO, C-Ward, District 24-Parganas, respondent No. 2, had reasons to believe that the income of the petitioner chargeable to tax had escaped assessment within the meaning of Section 148 of the said Act. It was also the case of the answering respondents that such notice was duly served on September 23, 1976, on the petitioner, after obtaining the due and necessary sanction of the Central Board of Direct Taxes and the said notice was served within the period prescribed under Section 149(a)(ii) of the said Act. The petitioner has stated that the said notice was served at the end of the 16th year under Section 149 as mentioned above, apart from claiming that the sanction from the Central Board, as mentioned above, was obtained without any basis, materials or evidence. The answering respondents have of course stated that there were materials and grounds on which the proceedings under Section 147(a) read with Section 149(a)(ii) of the said Act, were in existence and the necessary sanction, as mentioned above, was obtained, on placement of material facts and evidence.

3. The petitioner has of course stated that respondent No. 3, as mentioned above, acted illegally, in issuing the notice as mentioned above, without duly forming his belief on any material whatsoever and, as such, the requirements of Section 147 read with Section 149(a)(ii) of the said Act, were not fulfilled in the instant case and, as such, the concerned notice became illegal, invalid, void and barred by time. Such facts have of course been denied and disputed by the answering respondents through their affidavit-in-opposition dated July 27, 1981, which was filed by Abani Mohan Sen, respondent No. 1, and he has stated that such affidavit was filed by him, after taking charge of the ward and making himself acquainted with the facts and circumstances of the case, on retirement of his predecessor, viz., respondent No. 2, who made the assessment. The reasons for the concerned initiation, which were as under, were disclosed during the hearing of these proceedings ;

'The assessee, M/s. Ratanlal Mohta & Sons, have brought in their business Rs. 1,35,000 being peak credits in two names, viz., Sri Jawaharlal Jalal and Kanaiyalal Agrawala. No details and particulars of these credits were furnished before the Income-tax Officer at the time of original assessment. These two persons were subsequently found to be bogus persons. The assessee itself also admitted the credits in the names of these two persons along with some others as being not genuine loans but represented its own money introduced in the two aforesaid names, vide their above refund petition dated 22-6-65, before the Commissioner of Income-tax, West Bengal under Section 271(4A). Further, on enquiries made in connec-tion with various amounts shown as loans in the names of various parties by issuing summons to them under Section 131 for verifying the genuineness of the same loans in connection with penalty proceedings for the assessment year 1961-62, it was found that none of the alleged loan creditors appeared or complied with the notices and in some cases the parties were not even traceable.

In the circumstances stated above, I have on the basis of these informations, which have come into my possession, reasons to believe that the assessee-firm has introduced its own concealed income in its books in the garb of alleged loans in fictitious names to the tune of Rs. 1,35,000 and the so-called payments shown as interest on such loans and that income has escaped assessment--approximate tax effect Rs. 6,188--and I direct the said reasons to be kept in the record '.

4. The basis for the concerned initiation or the circumstances behind the same which have been indicated in the affidavit-in-opposition as filed, have also appropriately tallied with the reasons as disclosed. From such statements in the affidavit and reasons as disclosed, it would appear that the petitioner filed a disclosure petition before the Commissioner on June 26, 1965, under voluntary disclosure scheme, disclosing a sum of Rs. 8,16,000 which, inter alia, included the sum of Rs. 1,35,000 being undisclosed income for the said assessment year and in the disclosure petition, the petitioner had admitted that the various loans standing in the names of various parties in the balance-sheet filed for the said assessment year as well as for the subsequent years, were fictitious transactions. It has further been stated that in the balance-sheet for the said assessment year, filed by the petitioner, there were fresh loans to the tune of Rs. 1,35,000 and such sum had also been shown in the profit and loss account, by payment of interest to the tune of Rs. 75,367 but no details of loan or confirmation from the alleged loan creditors were filed at the time of the original assessment. It was further stated by the respondents that the petitioner had brought in its business a sum of Rs. 1,35,000 being peak credit in two names, viz,, Shri Jawaharlal Jalal and Kanaiyalal Agrawala, and no details and particulars of those credits were furnished before the ITO concerned at the time of the original assessment and those persons were subsequently found to be bogus persons. It has further been stated that the petitioner-firm had also admitted the credits in the names of these two persons along with some others as being not genuine loans, but represented its own income, credited in those names. It has further been stated that on subsequent enquiries made in connection with various amounts shown as loans in the names of various parties by issuing summons to them under Section 131 of the said Act for verifying the genuineness ofthe concerned loans in connection with penalty proceedings for the assessment year 1961-62, it was found that none of the alleged loan creditors appeared or complied with the notices and in some cases the parties were not traceable. It has also been stated that as the amount exceeded Rs. 50,000, proceeding under Section 147(a) of the said Act were initiated after obtaining approval of the Central Board of Direct Taxes in terms of Section 151 of the said Act. On such circumstances as mentioned above, it was claimed that the then ITO had bona fide reasons to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all relevant and material facts necessary for its assessment for the said assessment year, income chargeable to tax; had escaped assessment and, accordingly, after obtaining the sanction as mentioned hereinbefore, the then ITO duly issued the notice under Section 148 of the said Act. The petitioner has of course claimed that respondent No. 1, in obtaining the sanction as required, did not fulfil the requirements of Section 151(1) of the said Act and, as such, not only the notice, but all the subsequent proceedings taken thereon or thereunder, became illegal, invalid, without any basis or jurisdiction and in excess of the same. It has been claimed that there was in fact no material on the basis of which the concerned notice could be issued beyond the prescribed time-limit under Section 148 read with Section 149(a)(ii) of the said Act. Such non-fulfilment of the terms of requirements of the sections have of course been denied by the answering respondents.

5. It was the case of the petitioner that in the course of assessment proceedings for the said assessment year, the petitioner was represented through its partner, Shri H. D. Mohta, who produced the books of account, details of expenditure and details of source of income for the concerned assessment year and had discussions with the assessing ITO, regarding the income and expenditure as involved and the said officer, being satisfied, completed the assessment in the manner as indicated hereinbefore. It has further been stated that for the assessment year 1961-62, the petitioner was assessed by the concerned ITO, by making an addition of Rs. 3,41,570 to the total income and such amount was added on peak basis on the basis of the disclosure, filed by the petitioner in 1965. The respondents have stated that the assessment for the said assessment year was originally completed on September 5, 1960, on the basis of profit and loss account and balance-sheet as then filed. But, the petitioner had concealed and did'not disclose at the time of original assessment proceedings, the source of the cash credits, peak of which was arrived at Rs. 1,35,000. It has been stated that the original assessment for the said assessment year was completed on the basis of the material disclosed by the petitioner and then available to the assessing officer. It was pleaded by the petitioner thatthere was no fresh or any new information in the possession of respondent No. 1, in consequence of which he could have reason to believe that the income of the petitioner had escaped assessment and, as such, the condition precedent for the exercise of jurisdiction have not been satisfied. It was also stated by the petitioner that the respondent No. 1, not being the assessing officer, could not assume any jurisdiction by issuing notice under Section 148 of the said Act for the said assessment year and as such also the condition necessary and precedent for the assumption of jurisdiction have not been satisfied. It is true that the assessing ITO had not filed the affidavit-in-opposition but the same, on his retirement, has been filed by the ITO who was in-charge of the (file of the) assessee. The deponent of the affidavit-in-opposition has stated that the then ITO had reason to believe that income of the petitioner had escaped assessment and as such all the conditions precedent for the exercise of jurisdiction were fulfilled.

6. It was the allegation of the petitioner that there were absolutely no material in the possession of respondent No. 1 on which he could have any reason to believe that the income of the petitioner had escaped assessment within the meaning of Section 147 of the said Act as there was no omission or failure on the part of the petitioner to disclose fully and truly all material facts necessary, prior to the completion of assessment and the respondent No. 1, by the initiation as made, was making a roving and fishing investigation, without any materials. Such roving and fishing investigation, the petitioner claimed, was outside the purview of Section 147 of the said Act and was also sought to be utilised as a mere cloak or pretence, for making such fishing investigation, not authorised under the law. It has further been stated that respondent No. 1 was purporting to reopen the assessment for the said assessment year on a mere change of opinion and for the purpose of holding such roving and fishing investigation as mentioned above. In the facts and circumstances as indicated hereinbefore, the petitioner claimed that the notice under Section 148 of the said Act, as issued for the said assessment year, was illegal, invalid, without jurisdiction or in excess of the same, as the requirements under Sections 149(a)(ii) and 151(1) of the same Act were not fulfilled. It was also claimed that, in any event, the respondent No. 1 could not have formed any belief on the basis of the alleged materials, that the income of the petitioner had escaped assessment for the said assessment year within the meaning of Section 147 of the said Act and as such also, the notice and all proceedings thereunder were illegal, void, invalid, without or in excess of jurisdiction. After denying such allegations as indicated above, the answering respondents have stated that as the petitioner itself admitted in the disclosure petition a sum of Rs. 8,16,000, which, inter alia, included the sum of Rs. 1,35,000, i.e., undisclosed income for the said assessment year, the steps as taken were due, legal and bonafide as all necessary and relevant income and particulars thereof were not disclosed at the time of original assessment. The paucity or absence of materials in the possession of the officer concerned, on which he had reason to believe that the income of the petitioner had escaped assessment, was denied and disputed. It was also denied that there was no omission or failure on the part of the petitioner to disclose fully and truly all material or relevant facts necessary for the said assessment year or that the deponent was purporting to start a roving or fishing investigation, with a view to review the earlier order of assessment as alleged.

7. It was further claimed by the petitioner that there was no material to show that the income chargeable to tax which according to respondent No. 1 had escaped assessment, amounted to or was likely to amount to Rs. 50,000 or more for the said assessment year and, as such, the respondent No. 1 had no competence or authority or jurisdiction to issue the concerned notice. The petitioner further complained that the time-limit for the issue of the notice under Section 148 of the said Act, for the said assessment year, had already elapsed and as such the proceeding for reassessment was also illegal, void, invalid and without or in excess of jurisdiction. The respondents have claimed that the officer concerned had rightly issued the notice and since the amount which escaped assessment exceeded Rs. 50,000, notice was duly issued, after obtaining necessary sanction as indicated hereinbefore. It has further been stated that the notice in question, was served within the prescribed period and in terms of the requirements of the statute.

8. Apart-from the defence of the respondents as indicated above, it should also be rioted that it has been claimed that the said Act being a complete code in itself and the petitioner having failed to avail of the remedies under the said Act, would not be entitled to invoke the writ jurisdiction of this court. It has further been stated that no grounds have been made out for interference by this court at the stage and such interference is also not necessary and required.

9. The reply to the affidavit-in-opposition incorporating the defence of the respondents, the particulars whereof have been indicated hereinbefore, have been reproduced and to such statements, the petitioner has used an affidavit-in-reply dated April 2, 1982. In the said reply, apart from denying the material allegations, the petitioner has filed the disclosure petition under Section 271 of the said Act. The annexures to the said disclosure petition were not disclosed truly and fully and Mr. Sen Gupta produced the disclosure petition along with the annexures filed therewith and parties advanced their arguments on the basis of such disclosure petition, the particulars whereof would be mentioned hereinafter.

10. Mr. Roychowdhury claimed that the impugned action or initiation to be void and incompetent in view of the fact that the said assessment was duly completed on September 5, 1960, under the provisions of the 1922 Act and that too after making additions and disallowances and on considerations of relevant and available materials as disclosed. It was then contended by him that since the assessing ITO was Shri H. V. Upadhaya and he completed such assessment as mentioned above, on application of his mind and there has been no affidavit filed by him disclosing his subsequent satisfaction, which was or should have been the basis of the subsequent initiation, the proceedings cannot and should not be allowed to be continued and completed. It was thirdly claimed by Mr. Roychowdhury that as the impugned notice was issued after 16 years, the same was, therefore, issued after 8 years and was absolutely void, as there was no material, on the basis of which, the same could be issued beyond the time-limit under Section 148 read with Section 149(a)(ii) of the said Act and, furthermore, as the requirements of the latter provisions were not fulfilled. Section 149 lays down the necessary time-limit for the notice and Sub-clauses (a)(i) and (ii) are to the following effect:

'(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 ;' and under Section 149(1) no notice under Section 148 can be issued unless the above amongst other eventualities are satisfied. It was also contended that respondent No. 1 acted illegally, in issuing the notice beyond the time-limit under Section 148 read with Section 149(a)(ii) of the said Act, without duly forming his necessary belief on the basis of available materials and, as such, the requirements of, or under, Section 149(a)(ii) were not fulfilled or complied with. Then, Mr. Roychowdhury contended fourthly, that even on the disclosure petition under Section 271(4A) as filed, no initiation, as made, was possible, the more so when, such disclosure petition was rejected on June 22, 1965.

11. For the principles and guidelines in respect of initiation of proceedings under Sections 147 and 148 of the said Act, reference was made by Mr. Roychowdhury to the determinations in the case of ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) , wherein it has been observed that absence of the words ' definite information ', which were in Section 34 of the 1922 Act, before the amendment in 1948, in Section 147 of the said Act, would not lead tothe conclusion that action can now be taken for reopening assessment, even if the information is vague, indefinite, farfetched and remote and that the powers under the present section are wide, but they are not plenary since the words of the section are ' reason to believe ', and not ' reason to suspect ', apart from holding that finality of an order, cannot be changed or disturbed and interfered with, unless the necessary requirements of law are satisfied. It can also be deduced, according to Mr. Roychowdhury, on the basis of the concerned decision, that after a lapse of long years, in this case 16 years, the assessee should not be placed upon the rack and called upon to explain, not merely the origin and source of his capital contributions, but the origin of origin and the source of source as well.

12. On a reference to the observations in the case of ITO v. Selected Dalurband Coal Co. P. Ltd. : [1978]113ITR489(Cal) , Mr. Roychowdhury claimed, that the concerned report, which was the basis of initiation of the proceeding in this case, should have indicated about omission or failure of the assessee to disclose fully and truly the material facts relevant for the assessment and those facts not having been depicted in the report and moreover when the deponent of the affidavit-in-opposition was not the assessing ITO and there was in fact no affidavit filed by him, the reasons as disclosed cannot and should not be looked into or allowed to be placed for consideration. In fact, it was contended by Mr. Roychowdhury that in view of such admitted deficiency in the recorded reasons, the initiation as made must not be allowed to be continued and such initiation should also be held and found to be unauthorised and without jurisdiction. In the case of Madhya Pradesh Industries Ltd. v. ITO : [1970]77ITR268(SC) , which was a case under Section 34(1)(a) of the 1922 Act, it has been observed that there would be no jurisdiction of the officer concerned to proceed under the section if there was no proceeding by him before issuing the notice for enabling him to form the necessary belief. On a reliance to such observations, Mr. Roychowdhury contended that as no proceeding was initiated in this case, for forming the necessary belief by the officer concerned, and in fact no such belief appeared to have been duly formed, either from the affidavit or the records as disclosed, the contentions of the petitioner must be upheld. In the case of Grindlays Bank Ltd. v. ITO : [1979]116ITR710(Cal) , it has been laid down that, where the assessee avers that he had disclosed all material facts, in the absence of a contradiction by the ITO, who made the original assessment, such averments should normally be accepted. Placing reliance on such observations. Mr. Rowchowdhury claimed, that when the petitioner in this case has averred to have disclosed all material and relevant facts, in the manner as stated hereinbefore, and there has been no counter-statement by theassessing ITO, the petitioner should also be given the benefit of such determination. While on the question of non-filing of the return by the assessing ITO or the effect of the same, reliance was also placed on the determination of the Supreme Court in the case of H.A. Nanji and Co. v. ITO : [1979]120ITR593(Cal) , where the ITO stated his belief, but did not set out any reason in his affidavit-in-opposition, which was relevant for the purpose. Mr. Roychowdhury also claimed that there could have been no material for a reasonable formation of belief and no such material being available and present in this proceeding, the determinations to that effect also in the case of East Coast Commercial Co. Ltd. v. ITO : [1981]128ITR326(Cal) , should be applied in this case.

13. Since there was no conscious concealment of particulars or there was any evidence, that the assessee had deliberately furnished inaccurate particulars of the income, relying on the facts and determination in the case of Gumani Ram Siri Ram v. CIT , to the effect that before penalty can be imposed under Section 271(1)(c) of the I.T. Act, 1961, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income of the assessee and that the assessee had consciously concealed the particulars or had deliberately furnished inaccurate particulars of the income. Such observations were made on the facts of that case where while proceeding with the assessment of the assessee, the ITO noticed cash deposits of Rs. 12,000 appearing in the name of one R in the books of the assessee. When asked to prove the genuineness of these entries the assessee stated that he was not in a position to prove the genuineness of these entries and made a statement 'surrendering squared up account of Rs. 12,000 in the name of R'. The asssssee was then assessed on an income of Rs. 65,046, which included the amount of Rs. 12,000, as against the returned income of Rs. 46,446. Consequently, a penalty of Rs. 6,768 at 50 per cent, of the tax sought to be evaded was levied by the IAC under Section 271(1)(c) read with Section 274(2) of the I.T. Act, 1961. On appeal, the Tribunal maintained the order levying penalty but reduced the quantum to 1/3rd of the tax evaded. It was specifically observed in that case that, on the facts and in the circumstances of the case, penalty under Section 271(1)(c) of the I.T. Act, 1961, could not be levied merely because the cash deposits were surrendered by the assessee, unless there was material on the record to show that the surrendered item was his income. Mr. Roychowdhury claimed that the initiation, on the basis of the disclosure as made, was improper and void, apart from being without jurisdiction. It was claimed by him that the effect of the surrender or the disclosure as made, could not or should not be treated as concealed income in the facts of this case. While on his submissions on the disclosure petition under Section 271(4A),Mr. Roychowdhury made a specific reference to the determination in the case of Bhagwanji Bhawanbhai & Co. v. CIT : [1983]141ITR640(Cal) . In that case, the assessee was assessed for the assessment year 1957-58. In 1955, it credited certain amount under 'Disclosure Capital Account' in place of various hundi loan amounts in its books of account and filed a petition under Section 271(4A) requesting the Commissioner to spread the peak amount of hundi loan over a period of 10 years and praying that no penal proceedings might be taken against the assessee. Inspecting Assistant Commissioner imposed penalty which was affirmed by the Tribunal. At the instance of the assessee, a reference was made to the High Court as to whether the credit of certain amount under 'Disclosure Capital Account' in place of various loan amounts in its books of account at a later year amounted to an admission of concealed income on the part of the assessee, as is envisaged under the provisions of Section 271(1)(c) of the I.T. Act, 1961, and on such fact, it has been held that the question referred was whether the Tribunal was correct in holding that the statements made in the disclosure petition amounted to an admission of concealed income. Therefore, the question referred was whether on a proper interpretation of the disclosure petition, the assessee could be brought within the mischief of Section 271(1)(c) of the Act. Such a question could not be said to be a question of fact concluded by the decision of the Tribunal. In the facts and circumstances of the instant case, the High Court would be required to examine the statements made in the disclosure petition and then to examine the ingredients contemplated under Section 271(1)(c) and try to find out whether from the statements made in the disclosure petition it could reasonably be inferred that there was such an admission as held by the Tribunal and if there was no such admission whether penalty could be imposed under Section 271(1)(c). Thus the question in the background of the circumstances was certainly a question of law. The further facts in that case was that the assessee was originally assessed for the year 1957-58. In 1965, it credited certain amount under 'Disclosure Capital Account' in its books in place of various hundi loan amounts and filed a petition under Section 271(4A) requesting the Commissioner to spread over the peak amount of hundi loan over a period of 10 years and it has further been held on such facts that though the assessee offered the amount to be assessed after spreading over the amount for a period of 10 years, the assessee did not make any statement to the effect that the amount in question represented its income or receipt of revenue character of the year in question. Therefore, by merely relying on the said statement of disclosure petition, apart from anything else, the Revenue was not competent to impose penalty. Case law discussed, apart from holding that there must be evidence eitherin the admission of the assessee in disclosure petition or aliunde adduced by the Revenue to show that the amount represented receipt of revenue character in the relevant assessment year. It would not be sufficient to rely on the finding that a certain amount had been added as the income of the assessee of which the assessee could not explain the source nor would it be sufficient for penalty proceeding to rely on the statement of the assessee that the assessee has offered the amount for assessment in a particular year. The facts and circumstances and the terms and conditions under which the assessee had offered the amount for taxation must be looked into. If an assessee makes a statement that there was concealed income of the year in question or it represented receipt of revenue character of the year in question and the admission could be either expressly or impliedly referred to that fact, then such a statement in the disclosure petition might be good piece of evidence but merely offering an amount for addition to the assessment spread over a period for a peak credit of hundis, as seems to be the case in the instant disclosure petition, the Revenue was not absolved from the onus of proving that the amount not disclosed was the income of the assessee in the year in question. In a penalty proceeding though the finding or the concession made by the assessee in the assessment proceeding was good evidence these by themselves would not conclude the matter and these by themselves would not without any explanation lead to the conclusion that the amount added to the income of the assessee represented his income of the year in question.

14. On the question, if a partner's income, as disclosed subsequently, would give rise to a case of or an occasion for reopening and answering the same to be no, Mr. Roychowdhury referred to the observations in the case of Suganchand Chandanmal v. ITO : [1976]105ITR743(Cal) . It is true that where, in the original assessment, a cash credit from another party or an outsider is taken to be or accepted as genuine, a subsequent confession by that party, that he has done only name-lending, would not be enough to justify an action under Section 147 of the said Act and there must be a live link or close nexus between the materials coming to the knowledge of the officer concerned and the formation of his belief that the credit was not genuine and there should also be enough and sufficient materials for the necessary and reasonable formation of the belief. It was claimed by Mr. Roychowdhury that by the subsequent disclosure made under Section 271(4A) of the said Act, separate income of the partners and not that of the firm was disclosed and as such also the reopening against the firm was not proper.

15. The requirements of the provisions in Section 149(a)(ii) or the particulars of the section have been indicated hereinbefore. In support of his sub-missions on the irregularity of the initiation of the proceeding after the long lapse of time, reference was made by the learned advocate for the petitioner to the facts and observations in the case of P. K. Nair v. ITO : [1973]90ITR512(Ker) . In that case, the petitioner filed a writ petition challenging the notices under Section 148 of the I.T. Act, 1961, in respect of the assessment years 1950-51, 1951-52, 1952-53, 1953-54 and 1954-55. The basis on which the notices were issued to the assessee was that the ITO had reason to believe that income amounting to Rs. 2,54,740 had escaped for the five assessment years 1950-51 to 1954-55, and that this had to be assessed as income that had escaped assessment for the assessment years 1950-51 to 1954-55 at Rs. 50,948 for each year and on such facts it has been observed that the notices were issued on October 12, 1965, clearly eight years after the close of the latest of the assessment year in question. In such cases, under Section 149 of the Act, reassessment proceedings can be commenced only if the ITO had reason to believe that income chargeable to tax which had escaped assessment amounted or was likely to amount to rupees fifty thousand or more for that year. For any action for any assessment year, the omission or failure must relate to that year and income that escaped assessment must also be for that year. It is necessary that the income amounting to Rs. 50,000 or which is likely to amount to Rs. 50,000 had escaped assessment for that year and also that money exempted for the purchase of land and other property from the years 1946 to 1948, both inclusive, had been taken into account in reaching the figure of Rs. 2,54,740. Of this Rs. 30,578 pertained to purchase or acquisition of other property before the earliest of the accounting years, namely, 1949, relating to the corresponding assessment year 1950-51. These were completely extraneous and irrelevant considerations and could never form the basis of any material which could supply information to formulate a reasonable belief. Similarly, a capital gain said to have been earned by the assessee, by the sale of property of his in Bombay in 1947, amounting to Rs. 58,500, had been added as the income of the assessee. The capital gain, if any, was in 1947 and was, therefore, not relevant and so this amount of Rs. 58,500 would also have to be left out of account. If these two amounts were omitted from the total income that had escaped assessment as calculated by the ITO, the balance would only be Rs. 1,55,000. Assuming that this much income had escaped assessment for the five years, if the method adopted by the ITO of dividing the total income by five is adopted, then for each of the years the income that had escaped assessment would be much less than Rs. 50,000. There was nothing to indicate that in any particular year, out of the years 1950-51 to 1954-55, income in excess of Rs. 50,000 had escaped assessment. In these circumstances, the requirements of Section 147(a)of the Act read with Section 149 had not been satisfied and the ITO had no jurisdiction whatever to initiate reassessment proceedings for the said five years. That apart, reference was made to the case of Gupta Cold Storage v. ITO : [1978]115ITR819(All) , where for the assessment year 1961-62, the assessee disclosed an investment of Rs. 54,852 on land and buildings of a cold storage. In the course of investigation there was a valuation of the assessee's cold storage by a valuation officer. The valuation officer submitted his report in 1975, estimating the cost of construction of the building in which he included the wooden staging for stocking perishables, wooden staircase, insulated ceiling, etc., at Rs. 1,46,530. Thereupon, the ITO issued a notice under Section 148 on the ground that income in excess of Rs. 50,000 had escaped taxation by reason of the failure of the assessee to disclose fully and truly material facts necessary for assessment and on the question, whether the issue of the notice was valid, it has been held that the wooden staging, etc., which was valued by the valuation officer at Rs. 64,352, could not be regarded as part of the building but only as plant. If the value of the wooden staging were excluded, the total investment on the building of the cold storage, even according to the valuation officer, would be only Rs. 82,178. There was no basis for any reasonable belief by the ITO that the assessee's investment on building during the assessment year 1961-62 exceeded the amount shown by him, i.e., Rs. 54,852, by more than Rs. 50,000. Hence, he could not issue a notice under Section 148 beyond eight years from the close of the assessment year 1961-62. The notice was clearly beyond time and invalid. In the case of Baladin Ram v. CIT : [1969]71ITR427(SC) , it has been observed that it is now well settled that the only possible way in which income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year.

16. In the case of Keshtra Mohan Roy v, ITO : [1971]81ITR15(Cal) , after obtaining the necessary satisfaction of the Central Board of Revenue, the ITO issued on February 26, 1969, a notice under Section 148 of the I.T. Act, 1961, to the petitioner for reassessment of the income of the petitioner for the assessment year 1952-53. By a letter dated April 26, 1968, the ITO informed the petitioner that on examination of his assessment records, cash credits between November 5, 1951, and February 2, 1952, were found and that the ITO had reason to believe that those credits represented the petitioner's concealed income which had escaped assessment. The petitioner filed a writ petition challenging the validity of the notice and contended, inter alia, that as the accounting year of the petitioner, relevant to the assessment year 1952-53, ended on October 31, 1951, there was no question of the petitioner's disclosing the credits as each of such loanswas outside the accounting year of the petitioner and on such facts, it was held that it is well settled that the accounting period or accounting year for such undisclosed income would be the relevant financial year, that is to say, the year ending on March 31, 1952, and, as such, all the alleged credits would have to be considered in the petitioner's assessment for the assessment year 1952-53. On a reference to such facts and the observations, Mr. Roychowdhury contended that as really the amount involved was Rs, 35,000 which was less than Rs. 50,000 and not Rs. 1,35,000, the initiation was without jurisdiction, as the same was barred by time. It was also further contended by Mr. Roychowdhury that the reasons in this case being vague and indefinite, and as they do not constitute or disclose any materials even on the basis of the disclosure petition and furthermore when the same was rejected, the petitioner should be given the benefit of the observations in Addl. C1T v. Kanhaiyalal Jessaram : [1977]106ITR168(MP) . In the facts of that case, which were in the assessment of the assessee for the assessment years 1965-66 and 1966-67, the ITO included in the total income of the assessee the income standing in the name of the assessee's son, D, relying on a statement of the assessee that his son, D, was his benamidar in an application for settlement under Section 271(4A) of the I.T. Act, 1961, for the assessment year 1963-64. That offer for settlement had not been accepted by the Department. On appeal, the AAC deleted the son's income from the total income of the assessee and the Appellate Tribunal agreed with the AAC and on a reference it has been observed that the decision of the Appellate Tribunal was correct. If the offer for settlement is not accepted and if the Department insists on deciding the assessment case on merits, any facts said to be disclosed in such offer have to be altogether excluded. It was incumbent on the Department to have furnished the requisite material showing that the assessee's son, D, was the assessee's benamidar and any admission made in the offer for settlement under Section 271(4A) could not be accepted when the offer was not accepted by the Department.

17. Mr. Roychowdhury further referred to the facts in the case of Union of India v. Rai Singh Deb Singh Bist : [1973]88ITR200(SC) , where, after completion of the original assessments for the assessment years 1942-43 to 1953-54, on the assessee, an HUF, notices under Section 34(1)(a) of the Indian I.T. Act, 1922, were issued to reopen the assessments. The assessee and its karta filed writ petitions in the High Court claiming that there was no material before the ITO when he issued the notices on the basis of which he could have had reason to believe that any income had escaped assessment, and also calling upon the ITO to produce the report made by him to the Central Board as well as the order of the Board thereon. Neither the Union of India nor the ITO produced the report made by the officer or theorder of the Board thereon, but an affidavit was filed stating that the relevant records could not be traced from the file of the Central Board and no reason was given for not producing the records in the file of the ITO and it has been held that the recording of the reasons in support of the belief formed by the ITO and the satisfaction of the Central Board of Revenue on the basis of the reasons recorded by the ITO that it is a fit case for issue of notice under Section 34(1)(a) are extremely important circumstances to find out whether the ITO had jurisdiction to proceed under Section 34(1)(a) and since the records were not produced and no reasons were given for not producing them, the circumstances gave rise to an adverse inference against the Department, apart from holding that, on the facts, it was not possible to come to the conclusion that the facts necessary to confer jurisdiction on the ITO to proceed under Section 34(1)(a) had been established and the notices had to be quashed, in support of his contentions that the recording of reasons and the order of the Central Board of Direct Taxes, in this case, have not satisfied the necessary tests and the requirements of law.

18. Mr. Roychowdhury contended that the dominant feature as observed in the,case of CIT v. A. K. Das : [1970]77ITR31(Cal) , being firstly, the satisfaction of the ITO, secondly; such 'satisfaction' of the officer concerned must be ' in the course of any proceeding under the Act' and, thirdly, he may direct that such person shall pay by way of penalty, a Certain amount and the overall condition being that there has to be a 'concealment' in the matter of imposing penalty, such failures not being appropriately available in this case, the rule should succeed and the same be made absolute.

19. Apart from the above cases, with notices and copies to the other side, Mr. Roychowdhury referred to five unreported judgments of this court, on the question of the circumstances and the procedure and the manner, which are relevant and necessary for initiation of proceedings under Sections 147 and 148 of the said Act. The first case, on which such reliance was placed, Was the judgment dated June 16, 1972, in the case of Bhawaelal Chandmull v. ITO (Matter No. 58 of 1970). The reopening of assessment, which were made by several notices for different assessment years, in that case, was challenged in a proceeding under art. 226 of the Constitution of India, contending that there were no grounds or reasons to believe that the petitioner's income had escaped assessment, and the conditions precedent for the issue of the concerned notices under Section 148 had not been fulfilled. The affidavit-in-opposition was filed by the ITO, who issued the notices and in fact, excepting reiterating what was stated in the reasons as quoted in the judgment, no new or further fact was pleaded and it was stated that onsuch information as disclosed or indicated in the reasons, the respondents had reasons to believe that, due to concealment or failure on the part of the petitioner to disclose fully and truly all material facts, the income of the petitioner had escaped assessment. On the pleadings, the question which was required to be considered, in that case, was whether the respondents had shown sufficient cause for assuming jurisdiction for the concerned reopening of assessment and if on the materials, it could be said that the conditions precedent or as contemplated under Section 147(a) of the said Act were fulfilled. This judgment was by Sabayasachi Mukharji J. and his Lordship, after quoting Section 147(a) of the said Act and the determinations of the Supreme Court in the cases of Chhugamal Rajpal v. S.P. Chaliha : [1971]79ITR603(SC) , those in the case of Sheo Nath Singh v. AAC of I.T. : [1971]82ITR147(SC) , and the judgment of the Special Bench of this court in the case of Lakhmani Mewal Das v. ITO : [1975]99ITR296(Cal) , or the ratio of these, has observed that the reasons by themselves along with the affidavit-in-opposition filed on behalf of the respondents, would not justify assumption of jurisdiction in that case under Section 147(a) of the said Act, as in the case before his Lordship, it was not stated which of the parties had confessed and which of the parties were known name-lenders. It was contended in that case by the Revenue that the reasons should not be considered independently, but they should be taken in conjunction with the conduct of the petitioner, while deciding, whether the conditions precedent under Section 147(a) of the said Act have been fulfilled or not. The Revenue, apart from other evidence, also relied on the confession in that case and more particularly on the confession'of the parties claimed to be name lenders or known to be so, apart from the fact, that the petitioner was given opportunities to explain the position, but they had not acted on that basis or availed of such opportunities, and such conduct should be considered as an act of omission on their part to disclose fully or truly all material facts necessary for assessment. It has been observed that there is no legal obligation on the part of the assessee to oblige the Revenue to give any information or help the investigation after assessment has been completed for facilitating reopening of the assessment by them. The non-co-operation of or by the assessee with the Revenue was also claimed to be a relevant factor upon which they could in conjunction with the information in their possession, legitimately draw the inference against the assessee. Those contentions were not, of course, accepted on disclosure of reasons and more particularly when, either in the affidavit or in the order sheet or in the reasons as recorded, it was pleaded or mentioned that the assessments were reopened on the ground that there was information and that there was failure on the part of the assessee to co-operate with the Department in respect of such information. It has also beenobserved that it is not for the court to decide what are the factors which might be considered by a particular officer in forming the belief. It is for, the person, who has formed the belief, to state sufficiently clearly to this court, what are the factors that he had taken into consideration in forming a particular belief and it was only then possible for the court to judge whether the factors which had been taken into consideration were relevant or extraneous to the formation of the belief. Since there was no statement regarding such conduct of the assessee as mentioned hereinbefore, it was observed to be not possible to say in the case that the Revenue was reopening assessment on the ground that there was information and the assessee had failed further to co-operate with the revenue authority, in checking or verifying the correctness of that information and the conduct of an assessee can be taken into consideration in drawing a presumption against an assessee, but it has also to be borne in mind that the assessee was not obliged to reply to such a letter and, as such, the information upon which the I.T. Department purports to act should be definite and must be intimated to the assessee. Judged from this point of view also, it appeared to the learned judge that the information contained in the letter of April 19, 1966, to the assessee, was not of a definite nature that without a denial from the assessee this presumption against the assessee could be drawn.

20. The next unreported decision was dated October 3, 1972, made by P. K. Banerjee J. in the case of Jhinguriram Mahabiram v. 2TO (Matter No. 752 of 1967). In that case, it appeared that the petitioner gave some amount of loan to the credit of Lachmandas Lundaram in 1957 and produced discharged hundis and a certificate from the creditor. Subsequently, however, a creditor was examined, but he failed to substantiate the advances made by him. On that basis, the ITO held that these were mere allegations of loans, not verified by evidence and as such, it cannot be accepted. It was nowhere stated in the recorded order that this escapement amounted to omission or failure on the part of the assessee to disclose the material facts and on the basis of the recorded reasons, which were as under :

'The books of account of the assessee for the accounting year 1364 B. S. disclosed the following credits in the name of one Lachmandas Lundaram, alleged to be a dealer in hundis:

Date of loanAmount of loan

Rs.16-4-575,00022-4-5710,00026-4-575,000

The amounts were stated to be loans against hundis and evidence produced in support were discharged hundis and certificates from the alleged creditor.

Sri Lachmandas Lundaram was examined under Section 131 and it was noticed that he had no evidence or books of account to produce in support of the above loans. As a matter of fact, he had failed to substantiate the above advances by him to the assessee or to establish his creditworthiness on those dates to offer the loans.

Mere allegations unsupported by verifiable evidence cannot be accepted as full discharge of onus of explaining the credits in the name of a third party in the books of the assessee. I have, therefore, reason to believe that the sum of Rs. 20,000 represented income of the assessee for the year of account, which escaped assessment.'

21. It was contended that no notice under Section 148 of the said Act could be served and even in spite of the contrary submissions on behalf of the Revenue, following the views as expressed by the Special Bench of this court in the case in Chhugamal Rajpal v. S.P. Chaliha : [1971]79ITR603(SC) , it was held that the conditions precedent for exercise of powers under Section 147 were not satisfied.

22. The third unreported determination, as cited, was also of P.K. Banerjee J., dated April 25, 1972, made in the case of Banshidhar Ghanshyamdas v. ITO (Matter No. 531 of 1967). The rule was directed against a notice under Section 147 of the said Act and the challenge was that the conditions precedent for the exercise of powers under Section 147 were not followed or were available. The reasons as disclosed on production of the records were that for the subsequent assessment years it was found that the assessee introduced secret profits in the garb of hundi and khatapata loans. Since some of such lenders confessed before the Department that they merely acted as name-lenders to the parties, who introduced their own secret profits in the books and a good number of borrowers confessed that they introduced their own secret profits in the business in the name of fictitious third parties, by submitting the disclosure petition under Section 271(4A) and/or Section 60 of the Finance Act, 1956 (sic). The reasons as recorded were found to be vague amongst others, as there was no indication that the name-lending was in connection with the loans advanced in the assessment under consideration. The rule was made absolute on the basis of the determination of the Special Bench in Matter No. 326 of 1967 (Lakhmani Mewal Das v. ITO : [1975]99ITR296(Cal) .

23. The fourth unreported judgment was also one by P. K. Banerjee J. in the case of R. Shantilal & Co. (Private) Ltd. v. ITO (Civil Rule No. 2423 (W) of 1967), made on December 4, 1972. The reasons for reopening in that case,and on the basis thereof, the notice under Section 147 of the said Act was issued,were, during the year of account, the assessee had declared peak amountof hundi loans of Rs. 5,70,000. Mr. C. T. Shah, a director of the abovecompany along with his relations and employees, made disclosures under Section 68 of the Finance Act, 1965, and under Section 24 of the Finance (No. 2) Act,1965, declaring loans for Rs. 4,50,000, out of the above, as bogus and failedto explain the genuineness of the balance of loan of Rs. 1,20,000. Henceit appeared that the assessee's income from Revenue receipts escapedassessments owing to failure on its part to disclose fully and truly allmaterial facts necessary for its assessment and on the basis of such reasons,it was found and observed that conditions precedent for the exercise ofpowers were not satisfied.

24. The fifth unreported judgment was dated February 6, 1980, made by the learned Appeal Court in the case of ITO v. R. Shantilal & Co. (Private) Ltd. (F.M.A. No. 859 of 1973) and in that case the determinations made by P.K. Banerjee J. as made in the fourth unreported judgment as mentioned above, were upheld, even though the learned advocate for the Revenue relying on to the statements in addition, information is in possession of the Department to show that the creditors from whom the assessee took loans during the year of account, were not genuine lenders inasmuch as the said alleged creditors have confessed on oath before the Department, saying that they were doing havala business and acted as name-lenders, after signing bogus hundis for a consideration and the names of the said creditors were (a) Giridhari Singh Jhaman Singh, (b) Mohan Singh Khanhaiyalal, (c) Amarlal Moolchahd, (d) Vishnudas Moolchand, and (e) Dendram Vasudeo, wanted to contend that such recordings read with the reasons as recorded, would justify the initiation as made. These additional facts were not found to constitute any material, justifying the ITO to entertain reasonable belief that the income of the assessee had escaped assessment and such determinations were made following the determinations in the case of ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) , where it has been laid down by the Supreme Court that the reasons for the formation of the belief contemplated by Section 147(a) of the I.T. Act, 1961, for reopening an assessment, must have a rational connection or relevant bearing to the formation of the belief. The rational connection postulates that there must be a direct nexus or a live link between the materials coming to the notice of the ITO and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year, because of his failure to disclose fully and truly all material facts.

25. The learned advocates for the Revenue, after placing the reasons as recorded, the particulars whereof have been mentioned hereinbefore andso all the statements in the affidavit-in-opposition, though filed, not by the ITO concerned, but by his successor in office, as the said assessing officer was not available due to his retirement, claimed that the conditions necessary and precedent for assumption of jurisdiction were duly satisfied and the initiation was appropriately made on the basis of the subsequent disclosure petition and the circumstances as disclosed hereinbefore. It was also claimed that when the assessing ITO was not available for offering the affidavit-in-opposition, due to his retirement and the affidavit was filed by the ITO, holding the present charge and he made such affidavit, after acquainting himself of the facts from the records and the relevant records, including the reasons, were appropriately produced, so the statements in the said affidavit-in-opposition, can be looked into or considered and the determinations holding otherwise, would not thus hold good in this case.

26. Ordinarily, if and when the assessing ITO, who is required to form the due and necessary opinion and/or arrive at the appropriate satisfaction, in terms of the requirements of the statute and the guidelines, as laid down by the celebrated determinations as mentioned hereinbefore and cited at the Bar, in the matter of reopening an assessment, the affidavit disclosing the reasons should be filed by him. In case such officer is available, but the return to the rule is not filed by him, there would be no other way and hesitation but to hold and answer the lis against the Revenue and in favour of the assessee. But, if there are cases like the present one, viz., the assessing ITO is not available with the Department at the time of filing the return, because of his retirement or if he is not available at the relevant time of filing such return amongst other reasons because of his death or resignation, the affidavit as filed by the ITO, holding the charge and if he discloses that he has got himself acquainted with the facts from the records and duly discloses the reason why the concerned affidavit could not be filed by the assessing ITO and the statements in the affidavit as filed correspond with the reasons as disclosed from the records, then such affidavit, in my view, can be looked into and considered in a proceeding like the present one. Such being the position, I think on the grounds and circumstances as disclpsed in this case, the affidavit-in-opposition, which was filed, not by the assessing ITO, but by the officer, who was holding the present charge and the reasons as disclosed corresponded with the recorded reasons, the same, in this case, could be taken into consideration and looked into. Such and above being my views, I hold that the cases as cited at the Bar, on the paucity of appropriate statements, for non-availability of an affidavit-in-opposition from or by the assessing ITO, would be of no avail or of any application in this case.

27. The circumstances justifying the initiation of a proceeding under Section 147, by the issue of a notice under Section 148 of the said Act and the way and the manner in which satisfaction should be received or reached or the necessary and relevant opinion to be formed, have been indicated by the different celebrated judgments as cited at the Bar, the particulars whereof have been indicated hereinbefore. I think, the way and the manner or the circumstances which would justify reopening an initiation including the power to reopen beyond the period as prescribed and more particularly when they have also been indicated in the determinations dated November 24, 1981, in Income-tax Reference No. 157 of 1979 (C1T v. Nathuram Gokulka : [1983]141ITR791(Cal) , which was referred to by the learned advocates appearing for the Revenue in the manner and circumstances as indicated hereafter, are not required to be restated. In fact, all the cases as cited at the Bar, with their relevant facts and observations, even though were not required, have been quoted hereinbefore, as references to them were made by Mr. Roychowdhury.

28. In the instant case, the whole question would centre round the fact and effect of the disclosure petition filed by the assessee, which was earlier rejected or more particularly, if on such facts, the proceedings under Section 147(a) of the said Act were maintainable and validly initiated. In fact, a question similar to the above came for consideration in this court in that reference case under Section 256(1) of the said Act, which was between CIT v. Nathuram Gokulka : [1983]141ITR791(Cal) , and a reference to the said determination as mentioned above was made on behalf of the Revenue. Since, according to the learned advocates for the Revenue, there were certain mistakes in the report as mentioned above, they also produced a copy from the certified copy of the judgment in that case.

29. The said reference related to two assessment years, namely, assessment years 1962-63 and 1963-64, for which the previous years ended on March 31, 1962, and March 31, 1963, respectively. In the original assessment for the first year, the ITO accepted the cash credits in the account of one Radhakishan Almal of Rs. 27,000 as genuine after these cash credits had been investigated by him. On this aspect, the learned advocate for the assessee contended that the cash credits had been accepted after investigation. In the second year which was concerned, cash credits of Rs. 36,000 in the account of Surajmal Ganeshiram and Rs. 24,000 in the account of Amarchand Sureka were accepted after investigation by issuing summons to those persons concerned. In that year Rs. 9,000 in the account of the assessee's mother was also sought to have been accepted. The total amount thus came to be Rs. 69,000 for the second year. There was a disclosure petition filed by the assessee on or about July 6, 1967, before the Commissioner under Section 271(4A) of the I.T. Act, 1961, which wasrejected on April 25, 1974. The ITO had started proceedings under Section 147(a) of the I.T. Act, 1961, for the assessment year 1962-63 on January 15, 1971, and for the assessment year 1963-64 on January 17, 1972, that is, before the rejection of disclosure petition because the assessee stated that the amount of Rs. 27,000 in the account of Radhakishan Almal could be included in the assessment year 1962-63 and Rs. 69,000 for the assessment year 1963-64. The disclosure petition, amongst others, contained the statements that the petitioner has in his hands a sum of Rs. 63,000 which is liable to be, but yet unassessed, except for Rs. 5,000 introduced in your petitioner's books in his mother's name during the previous year 1964-65.

30. That from the previous year of 1962-63 onwards your petitioner has introduced in different benamis various amounts in his business books and (from 1963-64 onwards) in the books of his partnership above-named.

31. Thereafter, the assessee gave rotation list from year to year which has comprised both himself and his partnership. The assessee prayed that certain amount might be brought under tax by a spread over five years more or less equally commencing from 1963-64 backwards and the interest credited be included in the total income of the year. The instruction of the partnership book should be left out of the computation of the firm income and finally the assessee had asked for waiver of the penalties imposed. The assessee had annexed a rotation list with the disclosure petition. In the reassessment proceedings under Clause (a) of Section 147 of the I.T. Act, the assessee objected to the inclusion of the sums of Rs. 27,000 and Rs. 69,000 in the total income of the assessee from the year under reference by letters dated February 4, 1975, and February 7, 1975, respectively. In those letters, the assessee stated that he was filing the returns under protest and as the reassessment proceedings were invalid no adverse inference should be drawn on the basis of the said petition inasmuch as this was done under a misconception and general circumstances and panic thereto prevailing at the relevant time. There was general rumour that the creditors had appeared before the Revenue and had deposed that they were mere name-lenders and that the Department would act on their statements. The assessee further stated that in order to avoid unnecessary litigation and to purchase peace of mind, the assessee had offered for assessment certain deposits by spread over. It was further the case of the assessee that these deposits were duly considered and accepted at the time of original assessment after considering the evidence. Therefore, it was submitted that the proceedings under Clause (a) of Section 147 of the Act could not be taken for those two years. The ITO rejected this contention and included the amounts in the assessee's income for the two years. The appeal preferred against such determination by the assessee did not succeed.

32. Then the assessee moved the Tribunal and this time the assessee succeeded. The Tribunal was of the view that as the disclosure petition had not been accepted, the statement made in the disclosure petition could not be relied ,on as relevant material on which any reasonable belief could be formed that there, was non-disclosure of primary facts, which were required to be disclosed at the time of, the original assessment. The Tribunal discussed the question of the effect of the disclosure petition, the effect of non-acceptance of the statement in the disclosure petition and came to the conclusion that reopening under Clause (a) of Section 147 of the Act was without jurisdiction and on the application of the Revenue, the following question :

' Whether, on the facts and in the circumstances of the case, having regard to the disclosure petition filed by the assessee which had not been accepted by the Department, the proceedings under Section 147(a) of the I.T. Act, 1961, were validly initiated '

was referred for consideration under Section 256(1) of the said Act. On consideration of the materials as were available before their Lordships in that reference case, it was found that there was apparent contradictions between the statement made in the original returns and the statements made in the disclosure petition as the two statements could not go or stand together simultaneously and if one of them is true, the other one cannot be true and whether one of them is true or not will be an inference to be drawn on certain facts. It has also been observed that such contradiction by itself was a contradiction coming directly from the assessee and not from an extraneous source, the genuineness of the two statements could be considered to be sufficient materials on which a reasonable man could form a tentative belief that at the time of the original assessment, true materials or facts were not disclosed. In that case, on the basis of the facts as found and that too on the basis of the principles as enunciated by the determinations as mentioned therein, it was observed that it could not be said that there were no materials or reasonable nexus to the formation of the belief that the original assessment had not truly and fully disclosed or a reasonable man could not form a tentative belief on escapement of income and on such findings, the answer to the question as referred, was answered in the affirmative and in favour of the Revenue.

33. The facts of this case also correspond with the relevant facts as involved in the said reference case. Here also the application for disclosure was rejected and even though the assessee brought in their business a sum of Rs. 1,35,000 being peak credits in the names of Sarvashree Jawaharlal Jalan and Kanaiyalal Agrawala, ho details and particulars of such credits were furnished before the ITO at the time of original assessment and, sub-sequently, those persons were found to be bogus persons and there was an admission by the assessee of such facts amongst others, i.e., loans were not being genuine loans but represented its own money introduced in such names, by the petition dated June 22, 1965, before the Commissioner, West Bengal, under Section 271(4A) of the said Act and, furthermore, in the concerned enquiries none of the alleged loan creditors, even though duly summoned, appeared, and some of them could not even be traced. Such being the position, applying the test and principles as laid down in the case of CIT v. Nathuram Gokulka : [1983]141ITR791(Cal) , it can very well be said, found and observed that there were materials or reasonable nexus to the formation of the belief, that in the original assessment, the assessee had not truly and fully disclosed the relevant materials for the said assessment and, as such, the officer concerned could also form a tentative belief and that too in view of the discrepant statements as mentioned hereinbefore or available from the assessee. Such being the position, this court would not be justified in determining or deliberating at this stage, whether these materials were sufficient or was true or not and the officer concerned, on relevant materials or as would be lead at the concerned proceedings, would be entitled to decide and also to find out the truth or otherwise of the same. The concerned officer would also be entitled to decide and find out on such evidence or materials as led and produced, whether the statements in the disclosure petition under Section 271(4A) of the said Act, could be considered to be as sufficient materials attracting the imposition of the penalty or if such proceeding was barred by time.

34. The above being the position, taking into consideration the overall aspect of the facts, pleadings and determination, I think that the grounds as urged by Mr. Roychowdhury were not of much substance and as such they fail and so also the application.

35. The rule is thus discharged. There will be no order as to costs.

36. The prayer for stay is refused.


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