1976 (11) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Income-tax Officer was justified in reopening the assessment u/s 147(a) of the Income-tax Act, 1961.
2. The obligation of the assessee to disclose primary facts fully and truly.
3. The distinction between primary facts and inferential facts.

Summary:

1. Justification for Reopening the Assessment u/s 147(a):
The Income-tax Officer initially accepted the genuineness of cash credits in the assessee's balance-sheet after an enquiry. However, following the unearthing of a nationwide hundi racket and subsequent confessional statements from some creditors admitting to name-lending, the Income-tax Officer reopened the assessment and added Rs. 1,60,000 to the assessee's income. The Tribunal upheld this reopening, stating that if the confessional statements were related to the loans to the assessee, the reopening was justified.

2. Obligation of the Assessee to Disclose Primary Facts:
The assessee argued that all primary facts were disclosed during the original assessment, and the reopening was merely a change of opinion by the Income-tax Officer. The court reiterated that the duty of the assessee is to disclose all primary facts fully and truly. If the Income-tax Officer has reason to believe that the primary facts were not fully or truly disclosed, he may reopen the assessment based on new information or light thrown on previously disclosed facts.

3. Distinction Between Primary Facts and Inferential Facts:
The court emphasized that the duty of the assessee is limited to disclosing primary facts. The Income-tax Officer is responsible for drawing inferences from these facts. A mere change of opinion based on the same facts does not justify reopening an assessment. However, if subsequent information reveals that the facts disclosed were false, the Income-tax Officer can reopen the assessment. The court referred to several Supreme Court decisions, including Calcutta Discount Co. Ltd. v. Income-tax Officer and Income-tax Officer v. Lakhmani Mewal Das, to support this distinction.

Conclusion:
The court concluded that the Tribunal was justified in upholding the reopening of the assessment u/s 147(a) if the confessional statements were related to the loans to the assessee. The Tribunal will now reassess the matter in light of this conclusion. No costs were awarded.