1972 (12) TMI 33 - HC - Income Tax

These are two writ petitions for the issue of writs of prohibition prohibiting the respondent Income-tax Officer from continuing the proceedings in pursuance of his notice issued under section 148 - Originally the Hundi transactions were accepted by the ITO whether some evidence to show that the assessee could have indulged in bogus transactions would be sufficient to reopen the assessment - writ petitions are liable to be dismissed and they are accordingly dismissed

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 148 of the Income-tax Act, 1961.
2. Compliance with Sections 147, 148, and 151 of the Income-tax Act, 1961.
3. Jurisdiction of the Income-tax Officer to initiate proceedings under Section 147(a).
4. Constitutional validity of Section 297(2)(d)(ii) of the Income-tax Act, 1961.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 148:
The petitioner contested the reopening of assessments for the years 1960-61 and 1961-62 under Section 148, arguing that the new material obtained by the Income-tax Officer did not specifically relate to the petitioner's case. The court noted that the department had conducted thorough investigations into bogus hundi transactions and obtained statements indicating that some lenders were not genuine. The court found that even though the Income-tax Officer did not examine the specific creditors listed by the petitioner, there was "some material" to form a reasonable ground for believing that there had been non-disclosure of material facts, thus justifying the reopening of the assessment.

2. Compliance with Sections 147, 148, and 151:
The petitioner argued that the Income-tax Officer's report and the Commissioner's sanction did not comply with the necessary provisions. The court reviewed the report and found that the Income-tax Officer had provided sufficient material to justify the reopening of the assessment, including details about the loans and the belief that these were hawala transactions. The Commissioner did not mechanically accord permission but analyzed the facts and gave a reasoned sanction. Thus, the court held that the provisions of Sections 148 and 151(2) were satisfied.

3. Jurisdiction of the Income-tax Officer under Section 147(a):
The petitioner contended that the case should fall under Section 147(b) (information received subsequently) rather than Section 147(a) (failure to disclose material facts). The court distinguished the present case from the Supreme Court's decision in Commissioner of Income-tax v. Burlop Dealers Ltd., noting that the new statements from creditors indicated that the petitioner's previous representations were not true. Therefore, the case fell under Section 147(a) as there was a failure to disclose material facts initially. The court also dismissed concerns about the petitioner's ability to prove the genuineness of transactions at this stage, stating that these issues pertain to the merits of the reassessment and not the jurisdiction to initiate proceedings.

4. Constitutional Validity of Section 297(2)(d)(ii):
The petitioner argued that Section 297(2)(d)(ii), which allows reopening of assessments under the 1961 Act for assessments made under the 1922 Act, violates Article 14 of the Constitution. The court referred to the Supreme Court's decision in Jain Brothers v. Union of India, which upheld the constitutional validity of Section 297(2)(g) concerning penalty proceedings. The court found that the same reasoning applied to Section 297(2)(d)(ii) for reopening assessments, thereby rejecting the petitioner's contention.

Conclusion:
The writ petitions were dismissed, and the rules nisi were discharged. The court found that the reopening of assessments was valid, the procedural requirements were met, the jurisdiction under Section 147(a) was correctly invoked, and Section 297(2)(d)(ii) did not violate Article 14 of the Constitution.