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TMI Blog1996 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings for the succeeding year 1960-61, the assessee again showed hundi loans in a sum of more than rupees seventeen lakhs. The Income-tax Officer enquired into the truth of the averment and found that many of them were bogus claims while some of the alleged lenders were found to be near relations of directors or principal shareholders of the assessee. The Income-tax Officer held that out of the hundi loans of more than rupees seventeen lakhs claimed by the assessee, loans totalling Rs. 11,15,275 were not established to be genuine loans and accordingly added that amount as income from undisclosed sources. Having regard to the similarity of the claims and the persons who are said to have advanced the said unsecured hundi loans during the accounting year relevant to the assessment year 1959-60, the Income-tax Officer issued a notice under section 148 calling upon the assessee to file a revised return for the assessment year 1959-60. Immediately, upon receiving the said notice, the assessee approached the Calcutta High Court by way of a writ petition questioning the validity of the notice on the grounds that the Income-tax Officer had no reasonable ground to believe that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. " " 148. Issue of notice where income has escaped assessment.---(1) Before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. " " 151. Sanction for issue of notice.---(1) No notice shall be issued under section 148. after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. (2) No notice shall be issued under section 148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclose all material facts truly and fully. Coming to the facts of this case, the reasons recorded by the Income-tax Officer for reopening the assessment for the year 1959-60 are to the following effect : " In the course of the assessment proceeding for the assessment year 1960-61 investigations were made into the unsecured loans of Rs. 17,32,298 which was the position of the last day of the accounting year relevant to the assessment year 1960-61. These investigations disclosed that a large number of them were bogus hundi loans or loans from near relations of the directors or principal shareholders. Hence, the amounts credited to some of these accounts have been assessed as income from undisclosed sources to the extent of Rs. 11,51,275.00. Similar loans are noticed for the assessment year 1959-60 and they stand at Rs. 8,53,298 as per balance-sheet as on 16th April, 1959. I have, therefore, reasons to believe that by reason of omission or failure on the part of the assessee-company to disclose fully and truly all material facts necessary for its assessment of 1959-60 in regard to these accounts, income chargeable to tax has escaped assessment. I, therefore, propose action unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l facts by the assessee for the assessment year 1959-60 leading to escapement of income. It is not alleged by the assessee that the Income-tax Officer had not checked up or tallied the names of the alleged lenders for both the assessment years and that he merely went by the fact that there were unsecured hundi loans for both the assessment years. In the absence of any such allegation --- which allegation, if made, could have afforded an opportunity to the Income-tax Officer to answer the said averment --- we must presume that the Income-tax Officer did find that a large number of alleged lenders who were found to be bogus during the assessment year 1960-61 were also put forward as lenders during the assessment year 1959-60 as well. Evidently, this is what he meant in the context, when he spoke of "similar loans" being noticed for the year in question as well. In such a situation, it is impossible to say that the Income-tax Officer had no reasonable ground to believe that there has been no full and true disclosure of all material facts by the assessee during the relevant assessment year and that on that account, income chargeable to tax had escaped assessment. As we shall emphasise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts ; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is a capital receipt, or a revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and, taking all these together, to decide what the legal inference should be .... We have, therefore, come to the conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. " (emphasis added). In that case, the alleged n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be bogus. On that basis, he seeks to reopen the assessment. It is necessary to remember that we are at the stage of reopening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it is that the Income-tax Officer could have investigated the truth of the said assertion --- which he actually did in the subsequent assessment year --- but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact---and not an inference, factual or legal, to be drawn from given facts. In this case, it is shown to us that ten persons [who are alleged to have advanced loans to the assessee in a total sum of Rs. 3,80,000 out of the total hundi loans of Rs. 8,53,298] were established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot agree. The principle is well-settled by Calcutta Discount's case [1961] 41 ITR 191 (SC) and it is not reasonable to suggest that any different proposition was sought to be enunciated in the said decisions. Calcutta Discount's case [1961] 41 ITR 191 (SC) emphasises repeatedly the assessee's obligation to disclose all material facts necessary for his assessment fully and truly in the context of the two requirements called conditions precedent which must be satisfied before the Income-tax Officer gets the jurisdiction to reopen the assessment under section 147/148. This obligation can neither be ignored nor watered down. Nor can anyone suggest that a false disclosure satisfies the requirement of full and true disclosure. All the requirements stipulated by section 147 must be given due and equal weight. Finality of proceedings is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year --- and not to others. All the decisions relied upon by Sri Gupta have been elaborately discussed and distinguished in Phool Chand Bajrang Lal's case [1993] 203 ITR 456 (SC) and we fully agree with the same. We thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the said finding may not be binding upon the income-tax authorities but it can be a valid reason to believe that the chargeable income has been underassessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income-tax Officer believe that there has been underassessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income-tax Officer under section 147(a) of the Act was satisfied. As regards the second condition, the appellant did not produce the books of account kept by them at their head office in London nor the original contracts of sale which were entered into at London with the buyers. The appellant did not produce before the Income-tax Officer any of the accounts which related to the foreign buyers. No reasons were given for the supply of manganese ore at a rate lower than the market rate. It is for the assessee to disclose all the primary facts before the Income-tax Officer to enable him to account for the true income of the assessee. The proven charge of under-invoicing per se satisfies the second condition. The appellant's asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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