TMI Blog1991 (3) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... orded in the books of the agents of various importers of Hing at Rs. 35, 40,42 and 50 per kg. respectively inBombay. Mrs. Leela Bhatia had made sales of 9680 kg. in Dec., 1977 to May, 1978 through M/s Chanchal Singh Pradhan Singh, Ratha Bazar, Bombay @ 37.40 per kg. through broker atBombay. The sales are varying form Rs. 38 to Rs. 41 per kg. At the time of initiating proceedings under s. 147(a) of the IT Act, M.S. Uttam Chand Dwan Chand assessed with IAC(A) Range-X,New Delhihad already made disclosure showing additional income at the rate agreed to with the Department atBombayand shown additional income at rates shown in earlier paragraphs. I may further add that all the sales in respect of Mrs. Leela Bhatia were routed through M/s R.L. Traders, the family concern. 1. Mrs. Leela Bhatia Asstt. yrs. 1978-79 1979-80 . Sales through Chanchal Singh Pradhan Singh,Bombay 9680 kg. Rate varies from Rs. 37 to Rs. 41 . Sales through M/s R.L Traders familyv 23,362 kg. 39.5 per kg. approx. . Asst. yr. 1980-81 . . Through M/s. R.L. Traders 21392 kg. Rs. 42.50 per kg. . Throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prakash Co.Bombay 7 . 2. M/s O.P. Traders Case under s. 273A of the IT Act, 1961 . 3. M/s. Chetan Dass Lachman Dass 7 . 4. M/s Nand Lal Co 79 . 5. M/s Ranchhoddass M. Bombay 83 . 6. M/s Garg Trading 71 On the basis of this information, the Assessing Officer was of the view that the material on record shows that the assessee-firm was closely connected with the Hawala Hing and as such, he had sufficient reasons to believe that the income chargeable to tax had escaped assessment in these assessment years. Therefore, taking into consideration the average rate of under invoicing on the basis of additional income surrendered by the relatives/business associates to the assessee-firm that is Rs. 25 per kg. applied the same at the total sales of Hing at 45807 kg. and 25017 kg. for the asst. yrs. 1980-81 and 1981-82 respectively Therefore, he made additions of Rs. 11,45,175 in the asst. yr. 1980-81 and Rs. 6,25,425 in the asst. yr. 1981-82 as concealed profits. 3. When the matter came up for consideration before the CIT(A), the CIT(A) considered the objection of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal connection or relevant bearing on formation of belief. Rational connection postulates that there must be a direct nexus or live link between the material and belief for escapement of the income of the assessee. It is not that any and every material vague, indefinite or distant, remote or far fetched would warrant formation of belief about escapement of income of the assessee being occasioned by commission on part of the assessee." The general circular points out the concealment will be Rs. 1,00,00,000 in the case of the assessee without bringing any material on record. The rate on which some persons has surrendered income after about 2 to 3 years of research, cannot be taken the basis of addition against the assessee because the very fact that those persons sold their goods through Hawala agents, is missing in the case of the assessee. Quality of Hing sold by the assessee is inferior type which is called as Hing compound. The selling rate of this Hing compound is bound to be lesser than the pure Hing. The Sales-tax Department has accepted the sale of the assessee and they could not point out even a singly instance showing under invoicing by the assessee. Complete purchases a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ground to initiate proceedings under s. 147(a). Reliance was placed on the decision of the Supreme Court in the case of Indo Aden Salt Mfg. Trading Co. P. Ltd. vs. CIT (1986) 58 CTR (SC) 9:(1986)159 ITR 624(SC) and the decision of the Delhi High Court in the case of CIT vs. Bharat Insurance Co. Ltd.(1983) 34 CTR (Del) 371:(1983) 142 ITR 342 (Del). On enquiry from the Bench, it was asked from the ld. Deptl. Rep. that what is the material on record of the Department on the basis of which the assessment was reopened in the case of the assessee. The ld. Deptl. Rep. sought time for producing the report of ADI and material. But despite opportunity given, the ld. Deptl. Rep. did not attend the hearing on that day nor moved any application for adjournment. The informations called for were also not produced till the date of order. 6. We have considered the rival submissions. It is a settled principle of law laid down by the Supreme Court in the case of Lakhmani Mewal Das that the reasons for formation of belief contemplated by s. 147(a) of the IT Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f general circular of the Commissioner which indicated that many of the bankers who were supposed to have lent moneys were purely namelenders and it was held by the Madras High Court that as the circular of the Commissioner and the statements available with the Department did not refer to the assessee specifically but were general in nature, it could not be held that there was information available to the ITO. In the case of New Excelsior Theatre Pvt. Ltd. the Bombay High Court has observed that in order to reopen the assessment it is essential that the conditions laid down under s. 147(a) had to be fulfilled. That condition was that formation of belief that income had escaped assessment must be by reason of either the assessee's omission to file a return of income or non-disclosure of full and material facts necessary for the assessment. This view expressed by the Hon'ble Supreme Court was followed by the Hon'ble Bombay High Court in the case of Raja Bahadur Motilal P. Ltd. where it was found that there was no indication as to whether and in what content these parties were found to be non-genuine and how they were known to have indulged in bogus Hawala transaction or that the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped assessment in a particular year because of failure to disclose fully and truly all material facts. In the instant case, there is no such material or information available on record. When the Bench wanted to see the material on which the reopening of assessment is initiated, the Deptl. Rep. was unable to place such information on record. The ld. Deptl. Rep. did not appear on the date of hearing for placing material or information available on record. It is painful to note h ere that he did not care to inform the Bench that no such information or material is available on record. He rather preferred to be absent on that date. Therefore, in the absence of material on record, the initiation of reopening proceeding is invalid. The Department has simply gone on conjectures and surmises on the basis of some disclosure made in other cases which to our mind cannot be made the basis of reopening in the assessee's case. We would like to mention here that in the assessee's case, the book results were always accepted. No additions were ever made on the basis of estimation. The gross profit rate in the past years were accepted by the department. A perusal of that profit rate would show that w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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