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Chokshi and Co. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 209 of 1977
Judge
Reported in[1980]121ITR249(Cal)
ActsIncome Tax Act, 1961 - Section 147
AppellantChokshi and Co.
RespondentCommissioner of Income-tax
Appellant AdvocateR.N. Dutt, Adv.
Respondent AdvocateSuhas Sen, Adv.
Excerpt:
- .....in the assessment year where the financial year was the relevant previous year. accordingly, the tribunal held that the assessee should have produced its books of account for the subsequent gujarati dewali 2016 in connection with the assessment for the assessment year 1960-61 or, alternatively, should have disclosed to the ito that there were cash credits appearing in the books of account in the subsequent gujarati dewali year. the tribunal also held that the assessee had not discharged its onus of proving the genuineness of the loans. accordingly, the tribunal dismissed the appeal of the assessee. 7. on an application of the assessee under section 256(1) of the i.t. act, 1961, the tribunal has drawn up a statement of case and has referred the following question for the opinion of this.....
Judgment:

Dipak Kumar Sen, J.

1. This reference arises out of reassessment of the income of Messrs. Chokshi & Co., the assessee, for the assessment year 1960-61. The relevant previous year for the said assessment year was Gujarati Dewali 2015, that is, the period from the 11th November, 1958, to the 30th October, 1959.

2. The facts found and/or admitted in these proceedings are shortly as follows:

In the course of the assessment of the assessee for the subsequent assessment year 1961-62, the ITO noticed certain cash credits in the assessee's books of account, appearing in the names of different parties. The dates of the said credits fell within the financial year corresponding to the assessment year 1960-61. The ITO noticed that no ledger accounts were maintained in respect of such transactions and the entries in the cash book had been squared up in the cash book itself. Accordingly, the ITO initiated proceedings under Section 147(a) of the Act for the assessment year 1960-61.

3. In the said proceedings, on examination of the creditors, it was found that the alleged source of their funds in most of the cases were sale proceeds of ornaments belonging to their wives or mothers, which were alleged to have been sold for the purpose of advancing money to the assessee. Ultimately, the said money could not be accounted for and was found to have been spent or lost. No evidence could be produced in support of the sale of the ornaments to the assessee. Accordingly, the ITO held that the transactions were bogus. An amount of Rs. 35,700 representing the peak credit was added to the income of the assessee for the said assessment year 1960-61.

4. Being aggrieved, the assessee preferred an appeal and, inter alia, contended before the AAC that the transactions were between 27th November, 1959, and the 3rd February, 1960, and beyond the Gujarati Dewali year 2015 and, therefore, could not be relevant to the said assessment year 1960-61. The AAC found that the ITO had come to the conclusion that the transactions were not in the course of normal business activities of the assessee and accordingly should be considered to have taken place during the financial year which corresponded to the assessment year and not the assessee's accounting year. He also found that the assessee had failed to prove the genuineness of the transactions. Accordingly, the order of reassessment was upheld.

5. The assessee preferred a further appeal to the Income-tax Tribunal. It was contended in the appeal before the Tribunal on behalf of the assessee that the ITO could have proceeded against the assessee only under Section 147(b) inasmuch as the assessee was not obliged to produce its books of accounts for the subsequent Gujarati Dewali year 2016, in which the said transactions appeared in the assessment for the assessment year 1960-61. It was also contended that the creditors having admitted the transactions, the assessee had discharged its onus of proving the cash credits. It was contended on behalf of the revenue on the other hand that inasmuch as the said credit items were found to be income from undisclosed sources the assessee should have disclosed the same in the return for the assessment year 1960-61. Having detected the said items in the assessment for the subsequent year, the ITO was fully justified in initiating the proceedings under Section 147(a). It was also contended that the creditors had failed to substantiate the source of these credits or to produce any evidence as to their possession of the ornaments or the sale thereof.

6. The Tribunal did not accept the contentions of the assessee and held that it had not disclosed fully and truly all materials relevant to the assessment for the assessment year 1960-61. The Tribunal also found that according to settled law unexplained cash credits had to be included in the assessment year where the financial year was the relevant previous year. Accordingly, the Tribunal held that the assessee should have produced its books of account for the subsequent Gujarati Dewali 2016 in connection with the assessment for the assessment year 1960-61 or, alternatively, should have disclosed to the ITO that there were cash credits appearing in the books of account in the subsequent Gujarati Dewali year. The Tribunal also held that the assessee had not discharged its onus of proving the genuineness of the loans. Accordingly, the Tribunal dismissed the appeal of the assessee.

7. On an application of the assessee under Section 256(1) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and has referred the following question for the opinion of this court as the question of law arising from its order:

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in upholding the validity of initiation ofreassessment proceedings under Section 147(a) of the I.T. Act, 1961, for the assessment year 1960-61.'

8. Mr. R. N. Dutt, learned counsel for the assessee, has contended before us that the ITO had no jurisdiction to initiate proceedings under Section 147(a) inasmuch as the only circumstance before the ITO was non-disclosure of cash credits of the subsequent accounting period. He stated that it was not possible nor proper for the assessee, to make disclosures in respect of these items and, therefore, there could not have been any reasonable grounds for the ITO to believe that any income had escaped assessment. Mr. Dutt, however, did not dispute that the law was that if any concealed income of any assessee was detected then the financial year in which the said concealed income would arise would determine the assessment year in which the assessee would be assessed to tax for such concealed income.

9. In support of his contentions Mr. Dutt cited a decision of the Madras High Court in CIT v. T. R. Rajakumari : [1974]96ITR78(Mad) , where the High Court held that Section 147(a) of the I.T. Act, 1961, set out the conditions for invoking the power and jurisdiction conferred under that section. If the said conditions were not satisfied there would be no jurisdiction for the ITO to initiate reassessment. Even if the conditions set out in the said section were treated as matters of procedure, such procedure had to be followed strictly for attracting jurisdiction under the said section. Applying such principles it was held by the High Court that, where reassessment proceedings were initiated at the direction of the CIT, the same were invalid even if it was established that there had been non-disclosure.

10. Mr. Suhas Sen, learned counsel for the revenue, contended on the other hand that the Tribunal has found as a fact that the assessee had not disclosed fully or truly all materials relevant to the assessment for the assessment year 1960-61. This finding of fact not having been challenged by the assessee it was no longer open to the assessee to contend that the ITO had no jurisdiction to initiate proceedings and reassess the assessee in the said assessment year. In support of his contentions Mr. Sen cited a decision of the Supreme Court in CIT v. Kamal Singh Rampuria : [1970]75ITR157(SC) The facts in this case were that at the material time the assessee was a minor. In respect of the assessment year 1945-46, return of the minor's income had been submitted by the minor's father showing a share income from another concern. The interest income, however, from the said concern was shown in the account of the father. Subsequently, it was held on a reference that the interest income could not be assessed in the hands of the father. Thereafter, the ITO issued a notice under Section 34 of the Act to the assessee and completed the reassessment. An objection was taken thereafter by the assessee that the ITO wrongly initiated proceedings under Section 34 inasmuch as he knew that the income belonged to the assessee but chose to assess it in the hands of the father. The Tribunal rejected this contention and held that the assessee had not discharged the duty of returning his income at the proper time and disclosing the proper facts and, therefore, Section 34 did apply on the facts. On a reference, this court held in favour of the assessee that the reassessment was not justified in law. There was a further appeal to the Supreme Court. The Supreme Court held that the finding of the Tribunal was that the ITO had reason to believe that there was an omission on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In the absence of any challenge to such finding it was not open to the High Court to reappraise the evidence and to interfere with such finding. The matter was decided in favour of the revenue.

11. In the instant case also, there is a finding of the Tribunal that the assessee had not disclosed fully and truly all material facts' relevant to the said assessment year. The Tribunal has also held that it was the duty of the assessee to produce its books of accounts for the subsequent Dewali year in connection with the relevant assessment year or to disclose to the ITO the cash credits appearing in the subsequent Dewali year. Such findings have not been challenged. The submissions of Mr. Dutt that the ITO had no jurisdiction to initiate the reassessment proceedings were also not advanced before the Tribunal. The only submission was that the assessee was not obliged to produce its books of account in that assessment.

12. The question which has been referred to us is very limited in scope. The conclusion of the Tribunal that the reassessment proceedings had been validly initiated has to be upheld. For the above reasons, we answer the question in the affirmative and in favour of the revenue. There will be no order as to costs.

Bimal Chandra Basak, J.

13. I agree.


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