TMI Blog1992 (3) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... se goods filed their affidavits before the Central Excise Customs Authorities owning those goods. On 31-10-1979, 11 of those parties appeared before the Central Excise Customs Authorities, were interrogated and their statements were recorded in which they confirmed the statements and contents of their affidavits. After the proceedings before the Central Excise Customs Authorities between 7-3-1980 to 30-9-1980, those Authorities released the seized goods vide their order dated 21-11-1980. On 29-12-1980 those goods were seized by the ITO according to provisions of section 132A(2) of the IT Act from Central Excise Customs Authorities. Between 27-2-1981 to 19-3-1981 copies of affidavits were submitted before the ITO, H-Ward, Jaipur and the owners admitted the ownership of those goods. On 27-4-1981 order under section 132(5) was passed by ITO H-Ward, Jaipur assessing undisclosed income at Rs. 3,48,116 and raising total tax liability at Rs. 3,49,509. On 31-5-1982 the assessee filed a return of income for the assessment year under consideration showing total income at Rs. 9,610. On 15-6-1982 the assessment was made by ITO H-Ward, under section 143(1) accepting the returred income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of Shri Manohar Lal Gupta much before the assessment under section 143(1) was completed. 4. It has been argued by learned Departmental Representative before us that the assessee had filed a revised return on 29-9-1982, i.e., after the completion of assessment under section 143(1) on 15-6-1982. He pointed out that the notice under section 148 was issued on 16-11-1983 and the assessment was completed on 14-2-1986. According to the learned Departmental Representative since the revised return showed some different income than what was disclosed in the original return, it clearly showed that the assessee had not filed truly and fully the particulars of his income. Regarding the observations of the CIT(A), the learned Departmental Representative argued that since proceedings under section 147(a) had been initiated within time, there was no necessity for fresh information for initiating the proceedings. According to the learned Departmental Representative, the CIT(A) had gone only on the assumption that the proceedings were under section 147(b) and did not consider the provisions of section 147(a). He pointed out that the original return had shown computation of income at Rs. 9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these facts were in the knowledge of the' same ITO, namely, ITO H-Ward, Jaipur. He argued that section 147(a) does not entitle an ITO to make good his mistakes of negligence or inadvertence. He submitted that in this particular case the same ITO, who had initiated proceedings under section 148, had completed the assessment under section 143(1). He pointed out that the ITO had recorded the statement of the assessee prior to assessee's filing the original return and hence all the facts were in the knowledge of the ITO and it could not be said that the assessee had not disclosed truly and fully all the particulars necessary for completion of his assessment. He claimed that the income-tax return form nowhere prescribes any column to show those transactions which do not produce income although later on the ITO may reject assessee's explanation in respect of those transactions and may treat investments etc. in those transactions as assessee's income. The learned counsel referred to the decision reported in the case of Dunlop Rubber Co. Ltd. v. ITO [1971] 79 ITR 349 (Cal.) according to which a person who knows the fact has not to be informed. He submitted that disclosing all the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out to various short comings in the original return which the assessee tried to make good in his revised return. He also argued that if the goods belonged to different parties the assessee was under an obligation to record their names and particulars in his books which he had not done. He further submitted that "full and true disclosure" has reference to the Income-tax return and not to the facts in knowledge of the Income-tax Department or the ITO. 7. We have carefully considered all the facts and circumstances of the case and have also taken into account the arguments advanced from both the sides and the case law cited by each side. However, we are unable to find force in the appeal filed by the revenue or the arguments advanced by the learned Departmental Representative. A reading of the provisions of section 147(a) makes it clear that one of the conditions in which an Assessing Officer can take resort to those provisions is if there is omission or failure on the part of the assessee to make a return under section 139 of any assessment year. So far as this requirement is concerned, we find that the assessee cannot be said to be in default because as per the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral proposition, we may not be able to agree with him in this particular case because it is not the case in which it could be said that the Assessing Officer was not in the know of the activities of the assessee. In fact we find that inspite of the fact that the revenue had taken possession of the seized goods on 19-12-1980, not even a notice under section 139(2) was issued to the assessee. A perusal of the order under section 132(5) to our mind further indicates that in the face of overwhelming evidence filed by the assessee, the ITO had passed the order treating the amount of Rs. 3,48,116 to be income of the assessee only for the sake of retaining those assets although perhaps the ITO was not convinced that it could be treated as undisclosed income of the assessee. Thus the fact that no notice under section 139(2) was issued in this case during the relevant assessment year and even the order under section 132(5) appears to be an order without conviction, would indicate that perhaps the ITO was not satisfied that this amount should be assessed as the income of the assessee. Further even the issue of notice under section 148 shows that perhaps it was without application of mind o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneshilal Lal Chand the Hon'ble Rajasthan High Court had held that when at the time of original assessment the ITO had failed to take note of the cash credits, even if it was on account of over-sight or mistake or inadvertence, it did not empower him to re-open the assessment under section 147(a). In the case of Gemini Leather Stores the Hon'ble Supreme Court had reversed the decision of the Hon'ble Allahabad High Court and had held that if the ITO had not taken any action on the transactions which were evidenced by drafts in the original proceedings, he could not remedy the error of his own over-sight by taking action under section 147(a). In the case of Parashuram Pottery Works Co. Ltd. the ITO had allowed depreciation more than the original cost ignoring that initial depreciation had been allowed to the assessee, the apex Court held that the ITO could not take action under section 147(a) because this material was available on ITO's record and the assessee could not be held responsible for the remissness on the part of the ITO. We find that in the case before us the situation is even stronger in favour of the assessee than what it was in the above mentioned 3 cases because in tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed to be remedied by taking action under section 147(a). In the case of Ganga Saran Sons (P.) Ltd. it was laid down by Hon'ble Supreme Court that although the Courts may not look into the sufficiency or the adequacy of reasons which led the ITO to believe that income had escaped assessment yet there must be a nexus between the reason and the belief. In the instant case, as we have already discussed, in view of such overwhelming evidence having been adduced by the assessee regarding the ownership of precious stones, there do not appear to be any rational nexus between the reason and the belief of the ITO that income liable to assessment had escaped assessment. We may mention that the cases relied upon by the learned Departmental Representative are not of much help to him. In fact, in the case of Dwarka Prosad Bajaj even when the original assessment had been completed without application of mind regarding the genuineness of loans, and the ITO had got information from another ITO that the loans were not genuine, the action under section 147(a) was not held to be valid. In the case of A. Pusa Lal although it was held that ITO's power under section 143(2) does not exclude power to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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