TMI Blog1970 (2) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner's claim for deduction of a sum of Rs. 35,236, alleged to have been paid as interest on loans on hundis. A farther claim for a credit of Rs. 20,157, on sale of old gold appearing in the petitioner's profit and logs account was disallowed, as the Income-tax Officer did not accept the sale of gold. It appears that at the time of the original assessment the petitioner had submitted to the Income-tax Officer the relevant balance-sheet and profit and loss account and also a list of the creditors to whom interest had been paid during the accounting year showing the amounts of such interest and a copy of the complete loan account of the various creditors, 65 in number, appearing in his books of account. This is established by producing certified copies of the aforesaid documents from the records of the income-tax department. It is also claimed in the petition and not disputed in the affidavit-in-opposition that at the time of the assessment various confirmation letters from the lenders as well as some of the discharged hundis were produced before the Incometax Officer. A notice purported to be under section 148 of the Income-tax Act, 1961, dated the 24th March, 1969, and issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred by sections 147, 148 and 153 of the 1961 Act, corresponding substantially to the provisions of section 34(1) of the 1922 Act. Under the aforesaid provisions if an Income-tax Officer has reason to believe--(i) that by reason of the omission or failure on the part of an assessee to make a return or to disclose fully and truly all material facts necessary for his assessment for any year, income chargeable to tax has escaped assessment for that year ; or (ii) notwithstanding that there has been no such omission or failure on the part of the assessee the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year he may within eight years from the end of the assessment year in cases falling under (i) and within four years from the end of the assessment year in cases falling under (ii) proceed to assess or reassess such income after issuing a notice containing all the provisions as mentioned in section 139. There is an Explanation which lays down that production before the Income-tax Officer of account books or other evidence from which material evidence could with due dili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing enactment, the proper tax leviable ......... There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet the possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the legislature has put in the Explanation which has been set out above ......... His omission to bring to the assessing authorities ' attention those particular items in the account books, or the particular portions of the documents, which are relevant, will amount to ' omission to disclose fully and truly all material facts necessary for his assessment '. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section gives a quietus to all such contentions; and the position remains that so far as the primary fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... divided family Continued to exist and issued a notice of reassessment on the Hindu undivided family. In this context, the following observation was made by Supreme Court on which reliance is placed by Mr. Sen : " If the case of the revenue was true on which we do not express any opinion and the fact of the continuance of the joint Hindu family was kept back from the knowledge of the Income-tax Officer, it would be a clear case of the said family escaping assessment during the relevant year. If that be so, section 34(1) would immediately be attracted and the notice issued would be good." Mr. Sen submitted that assuming the revenue's case to be true,namely, that these hundi lenders were spurious persons and the loans were fictitious and that such fact was not disclosed to the Income-tax Officer at the time of the original assessment, it would be a case of the assessee's income escaping assessment, and the validity of the impugned notice could not be assailed. The next case relied on by Mr. Sen is a decision of the Andhra Pradesh High Court in Anna Nagendram and Bomma Reddi Venkayya Co. v. Commissioner of Income-tax. What happened in that case was that certain cash credits shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted the assessee's contention that these were genuine hundi loans on which interest has been paid, the subsequent discovery of facts which led him to believe that the hundi loans were not genuine would entitle him to invoke the provisions of section 147 of the 1961 Act. Dr. Pal's counter to that argument is that the observations must be confined to the facts of that case as appearing from the passage quoted above, and as confined to the facts of that case Dr. Pal has no quarrel with the proposition laid down. If there has been any failure on the part of the assessee fully and truly to disclose all facts, then on subsequent information that the income has escaped assessment the Income-tax Officer would certainly be justified in initiating proceedings for reassessment. Dr. Pal submitted that in this case there has been no failure at all on the part of the assessee to disclose any material facts. This is not a case where the Income-tax Officer merely accepted the return without scrutinising or examinirg the evidence and documents produced before him. That he has scrutinised the profit and loss account and the balance-sheet would be obvious from his disallowing the claim for the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to investigate. The second contention was also rejected. Unfortunately, it was not contended before the court that all the primary facts relevant to the alleged loans had been disclosed and considered by the Income-tax Officer at the time of the original assessment and, consequently, there could have been no failure on the part of the assessee to disclose any such facts. On the facts of the present case, I would be inclined to hold that the Income-tax Officer was trying to make reassessment of the petitioner's income on a change of opinion as the original Income-tax Officer had all the materials before him for deciding the issue of the genuineness of the hundi loans, and the assessment order loints to the fact that be did consider such materials and accepted the petitioner's claim. After the argument in this case bad been concluded, Mr. Sen drew my attention to a very recent decision of a Divisional Bench of this court, sitting on appeal from a decision of A. N. Sen J. in Original Order No. 202 of 1967, Income-tax officer v. Sudhir Kumar Bhose. It appears that in the return for the relevant assessment year the petitioner had not filled in Part VII of the return showing any transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they were not genuine. The question whether they were genuine or not was to be determined in the proceedings initiated by the notice." Similarly, the decision of the Supreme Court in Bachu Lal Kapoor's case has also been accepted as an authority for the proposition that the acceptance of a return or the completion of an assessment does not take away the jurisdiction of the income-tax authorities to issue a notice under section 34(1)(a) on the ground that the information supplied by the return was not correct. I do not think that the aforesaid decision takes the matter any further. The primary fact to be decided in all such cases is whether the assessee has fulfilled his duty in making full and true disclosure of all material facts necessary for the purpose of his assessment. In my opinion, Dr. Pal was justified in his query what else could the assessee in this case have disclosed in order to support his claim for deduction of the interest alleged to have been paid on the hundi loans? He has supplied a list of the lenders together with their addresses, the particular amount of the loans and the interests paid on account thereof, confirmation letters from these lenders and in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed. There will be no order as to costs. Operation of this order would be stayed for four weeks. K. L. ROY J. (6-3-1970).- After I dictated my judgment in this matter Dr. Pal requested for an opportunity to argue the case on only one point, viz., on the decision of the Supreme Court in Bachu Lal Kapoor's case, a passage from which had been quoted and relied on in my judgment and which, not having been cited before me in the course of arguments, Dr Pal had no opportunity of dealing with it. I readily accorded Dr. Pal an opportunity of making his submissions on the aforesaid decision of the Supreme Court. Dr. Pal submitted, and in my opinion correctly, that the facts before the Supreme Court were different from the facts in the present case. In that case the notice under section 34 was admittedly served within four years and, therefore, the question of the income escaping assessment for the failure of the assessee to disclose did not arise. In fact the contention of the department before the Supreme Court was that the Income-tax Officer had subsequent information that the income of the Hindu undivided family had escaped assessment. The only argument advanced by the respondent be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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