TMI Blog1985 (11) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has concealed his income which has escaped assessment by reason of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment, proceedings under section 147(a) were initiated. Notice under section 148 of the Act dated 2-10-1977 was served on the assessee on 7-3-1977, which was not complied with by the assessee. Subsequently, a notice under section 142(1) of the Act was issued which was served on the assessee on 26-7-1980. The assessee filed a petition dated 18-8-1980 praying for adjournment on the ground that authorised advocate would go to Dibrugarh on that day. The office of the present ITO is at Tinsukia. Time was allowed, accordingly, when the authorised advocate appeared before the ITO and submitted that the assessee would furnish the return within a few days and, accordingly, requested for short adjournment which was allowed. But there was no compliance on 29-9-1980. Again the ITO allowed the assessee to comply with the notice under section 148 and notice under section 142(1). But again the assessee did not comply with the same. The ITO, therefore, proceeded to make the assessment to the best of his judgment under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee was carrying on the business of manufacture and sale of iron steel pipes, buckets, etc., and fabrication of steel structure in his factory which is located at Tinsukia and was registered as a small scale industry with the State Government authorities. It was pointed out that the raw materials required were controlled by the Government machinery and the requirements of the assessee were ascertained and the permit issued by the State authorities for obtaining raw materials, which was supplied by the Hindustan Steel Ltd., Assam Small Scale Industries Development Corpn., etc., which were all the Government agencies. It was pointed out that under the regulations, the assessee had to maintain day-to-day record of arrival and utilisation of raw materials and had also to submit the annual returns, value of the materials purchased, details of closing stock, etc., to the authorities concerned who scrutinised and checked the accounts. It was pointed out that those registers maintained were signed by the superintendent of industries for each arrival of raw materials. The contention of the assessee was that the original assessment was made after intensive investigation by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Diamond Sugar Mills Ltd. v. ITO [1973] 89 ITR 171 and also in ITO v. Hongkong Shanghai Banking Corpn. [1978] 115 ITR 582. 8. The Commissioner (Appeals) considered the various arguments made before him and looked into the records. He found that the ITO has not brought on record any new fact or any omission or commission on the part of the assessee. He noted that the assessee furnished a list of the closing stock with the return, as on 31-3-1972 which was at Rs. 41,737. He pointed out that there was noting by the ITO on the stock list which showed closing stock position, vis-a-vis, the bank over-draft which was considered and examined by the ITO. He also pointed out that there were several notings in the balance sheet which indicated that the ITO examined the bank over-draft account also. The Commissioner (Appeals), however, pointed out that the records, however, did not appear to show as to what enquiries the then ITO made on this point and how he became satisfied in spite of large difference in the value of the closing stock as per accounts and bank over-draft. The Commissioner (Appeals) reproduced reasons recorded by the ITO for initiating action und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the Commissioner (Appeals) observed that on this score alone the assessment was liable to be cancelled. 11. The Commissioner (Appeals) dealt with the point on merits also. On his detailed reasoning he found that on merit as well, the action of the ITO was not justified. He, therefore, allowed the appeal by the assessee. Hence, this appeal by the revenue. 12. It is submitted by the learned departmental representative that the Commissioner (Appeals) was not justified on the facts of the case to cancel the assessment as such and thereby deleting the above addition. The learned departmental representative emphasises the findings, reasons, etc., given by the ITO in the assessment order. According to the revenue, the fact that the assessee disclosed the value of the goods at Rs. 92,507 as on 31-2-1972 to the bank was obtained only from enquiry with the State Bank of India, as discussed in the assessment order. It is submitted that since there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the Commissioner (Appeals) on the facts of the case erred in cancelling the reassessment. It is submitted that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT v. T.S.PL. P. Chidambaram Chettiar [1971] 80 ITR 467 in which on the facts of that case, it was held that the fact that there was some vague information before the officer at the time of the original assessment, was by itself not sufficient to bring to tax the amount particularly in view of the fact that the assessee had denied it and that the fact that the officer could have made further enquiries, but did not do so, did not take the case out of section 34(1)(a) of the Indian Income-tax Act, 1922 as the assessee had failed to place truly and fully all the material facts before the officer. The Hon'ble Supreme Court further observed that the remarks made by the officer in the order sheet did not amount to a decision taken by him on the basis of the facts found but had to be treated as casual observation. The Hon'ble Madras High Court in the case of K.P. Arthanariswamy Chettiar v. First ITO [1972] 84 ITR 51 on the facts of that case, had held that the disclosure to be made by the assessee should not only be full but also be true and it was not enough if it was true equally, it may not be full. Action under section 147(a) in that the Madras High Court case was substained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO to take action under section 147(a). We are of the view that the Commissioner (Appeals) erred in making this inference which related to other assessment years which were not before him for consideration. As observed by the Hon'ble Calcutta High Court in Namdang Tea Co. Ltd. v. CIT [1982] 138 ITR 326 each year is independent and in taxation matters there is no estoppel and principle of res judicata would not apply. As far as the assessment year 1972-73 which is present before us, we do not find that there was a difference of opinion between the assessing officer and the IAC concerned. Besides, as indicated earlier, the ITO who completed the original assessment, had not formed any definite opinion on the point at issue and in such a situation when there was no such opinion formed earlier, there can be no question of changing of opinion. In fact, the Commissioner (Appeals) at latter part of paragraph 7 of his order observed that there was no indication in the assessment records as to the nature of enquiries made by the ITO who made the original assessment, regarding the difference in the value of the stock, but there was sufficient indication that the matter did receive the though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od was to declare stocks sufficient to cover the over-draft limit even though they did not have such stock. It was also noted that so long as the loan was on hypothecation of the stock, banks also did not exercise effective control to check the correctness of the declaration made by the traders. The Commissioner (Appeals) noted that this practice was no doubt a sub-standard morality on the part of the traders, but the fact remained that this sub-standard normal practice has been in vogue for quite a long time and so far as the security of the bank was concerned, they take collateral security for the fixed assets as also the personal guarantee of the debtor. He also mentioned that till the transactions went on satisfactorily, the bank did not bother much about the direct security. The Commissioner (Appeals) pointed out that similar consideration came up in several cases as in the case of Coimbatore Spg. Wvg. Co. Ltd. v. CIT [1974] 95 ITR 375 (Mad.). He pointed out that in the present case the facts were that the books of account have been accepted and the stock as per books were corroborated by the statutory annual returns submitted to the industries department so far and utilisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial assistance, on the basis of which the addition made by the ITO was not at all justified, particularly when the ITO did not find fault with the accounts of the assessee maintained for the year under consideration. It is urged at length that on the facts of the case and the materials noted by the Commissioner (Appeals) in the impugned order, the addition was rightly deleted by the Commissioner (Appeals) whose order requires to be sustained. 24. We have gone through the orders of the authorities below for our consideration and we have perused other papers placed in our file. As indicated earlier, the assessee's learned counsel relied on the decision of the AAC in giving a direction to the ITO under section 144B(2) not to make similar addition for the subsequent years, on the same reasons made for the addition during the year under consideration. As far as this aspect is concerned, we are of the opinion that the direction of the IAC to the ITO for the subsequent year would not have any material bearing on the issue for the year under consideration. For the year under consideration, i.e., 1972-73, the ITO has pointed out that there was a difference of the value of the stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble High Court that the decision in the case of Ramakrishna Mills (Coimbatore) Ltd. cannot be taken to be an authority for the proposition that the stock declaration made by the assessee to the banks should not be taken into consideration at all. In fact, it was observed that the Tribunal was not expected to take judicial notice of sub-standard morality on the part of the assessees so as to enable them to go back on their own sworn statement given to the banks and heavy burden lies on the assessees to prove that the books of account alone gave a correct picture and sworn statements given to the bank were motivated. 25. In the instant case before us, apart from assertion there was no material to show that the sworn statements regarding the valuation of the stock to the bank, were motivated and in fact, it has not been proved that the books of account alone gave a correct picture. That apart, it was observed by the Hon'ble High Court that the alleged practice of declaring larger stocks to banks, has neither been shown to exist nor recognised in commercial circle or by the Courts and even assuming that such practice exists, the Tribunal is not expected to take judicial notice ..... 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