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TMI Blog1974 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... as Gaylord Restaurant, Bombay, and it had taken loans from the Delhi office as well as other parties. In the balance-sheet, the petitioner had shown the liability of loans on hundies and otherwise to the extent of Rs. 1,09,400. Details of the loan account as well as the names of lenders were furnished while in respect of hundi account, it was mentioned that the petitioner had taken Rs. 25,000 from Nand Lal Chhugamal and Company. The interest paid to that concern was also shown. It appears that at some later stage, details of the loans on hundies from Nand Lal Chhugamal, brokers, were filed. It contained the names of 10 parties from whom Rs. 5,000 each had been borrowed on various dates between 29th August, 1956, and 14th December, 1956. They are shown in annexure " B " filed with the counter-affidavit. For the subsequent assessment year 1959-60, there were 14 items of loans from various parties. Perhaps there is one party which is common to both the lists, namely, Permanand Deepchand Hinduja, but no dispute has been raised in its respect and we are not concerned with it. One material party to the notice was Sobhraj Dhanrajmal from whom two items of Rs. 5,000 each were borrowed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hundi loans amounting to Rs. 25,000 which was considered to be bogus. The grant of the writ has been opposed. This affidavit had not been filed by the Income-tax, Officer who had initiated proceedings for reopening of the assessment. Consequently a second affidavit-in-opposition dated 16th November, 1973, has been sworn by Shri Balwant Singh, Inspecting Assistant Commissioner, who was the Income-tax Officer concerned. In paragraph 3, the basis of the reasonable belief of the officer concerned has been disclosed and a detailed reference to it will be made hereinafter. At the moment it would suffice to say that the ground disclosed is that one Sobhraj Dhanrajmal was, during the course of assessment for the subsequent year 1959-60, found to be a bogus money-lender. Along with this affidavit, details of the loan account have been filed. Annexure " B " contains a list of the creditors for the assessment year in dispute, while annexure " B ", Part II, contains a list of the creditors for the next assessment year 1959-60. Annexure " C " is a copy of the report of the deponent to the Commissioner of Income-tax for initiating proceedings and it contains the Commissioner's order. A rejoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where income chargeable to tax has been under-assessed ; or (b) where such income has been assessed at too low a rate ; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922) ; or (d) where excessive loss or depreciation allowance has been computed. Explanation 2.-Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. " Section 149 prescribes the time-limit for action under clause (i) as 8 years from the end of the year, while the time-limit under clause (ii) is longer. Section 148 of the Act requires that 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 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt is not concerned with the question whether the materials may be regarded by a court, before which a dispute is raised, to be sufficient to sustain the belief entertained by the Income-tax Officer. In Kantamani Venkata Narayana and Sons v. First Additional Income-tax Officer, the Supreme Court held that in proceedings under article 226 of the Constitution challenging the jurisdiction of the Income-tax Officer to issue a notice under section 34(1)(a), the High Court was only concerned to decide whether the conditions which invested the Income-tax Officer with power to reopen the assessment did exist and it was not within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment and consequent escapement of income from assessment and tax. In Commissioner of Income-tax v. A. Raman & Co. the Supreme Court observed that the expression " information " in section 147(b) must mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment and that the High Court exercising jurisdiction under article 226 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before him for taking action under section 148 and his conclusion that there was a case for investigating the truth of the alleged transactions was not the same thing as saying that there were reasons for the issue of the notice and that the Commissioner had mechanically accorded permission and so the important safeguards provided in sections 147 and 151 had been lightly treated by the officer and the Commissioner and so the notice issued under section 148 was held to be invalid. In Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax, the report of the Income-tax Officer to the Commissioner for sanction to reopen the assessment contained two reasons, namely the assessee who was at the relevant time a managing director in about a dozen limited companies along with " Oberois " was believed to have made some great profits which were not offered for assessment, and, secondly, the assessee was believed to have received a sum of Rs. 22 lakhs from " Oberois " and this sum or at least a part of it represented his income which had escaped assessment. The Supreme Court in these circumstances held that the two reasons given for the belief by the Income-tax Officer hopelessly fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer given on the reverse of the document, Mr. Dhebar pointed out that the form which was previously used and on which the report in the instant case had been made was different. Mr. Dhebar then produced a copy of the report of the Income-tax Officer in this case which is contained in a form containing only 9 entries. It, therefore, appears that the report which was certified as true and filed in the court along with the affidavit had been written out on a different form than the one actually used at the time and the same has been carelessly certified to be true. The material answers against the entries in the two forms are not different, but a greater care is certainly called for on the part of public authorities to certify documents as true, particularly when they are being filed in a court of justice. I have allowed Mr. Dhebar, counsel for the respondents, to file the correct copy under his certification. The reasons given by the Income-tax Officer in this report are as follows : "The assessee took loans against the hundies through M/s. Nand Lal Chhugamal and Co., brokers. Some hundi bankers have already given a statement that they never gave genuine loans to any part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l denied having given any loan to the assessee through Nandlal Chhaganmal. This showed that the larger number of credits were 'bogus' and the petitioners had not truly and fully disclosed all material facts necessary for his assessment for the assessment year 1957-58 and that income chargeable to tax had escaped assessment for that year. In pursuance of the above and having thus reason to believe that the income had escaped assessment and the petitioner had not disclosed fully and truly all material facts as aforesaid I submitted the proposal to the Commissioner on 28th March, 1966, and the Commissioner after having considered the same was satisfied that it was a fit case for issue of notice under section 148 of the Act; hereto annexed and marked 'C' is a copy of the order of the Commissioner. " From the above affidavit, it is clear that the banker that is alleged to having made a statement was Sobhraj Dhanrajmal who had advanced the loan in April, 1958, for the assessment year 1959-60, but this is not the assessment year in dispute, for the relevant year was 1957-58. As is apparent from the list (the first part of annexure " B ") no loan whatsoever had been taken from Sobhraj Dha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pure Ice Cream. I had just and fair reasons to believe that the names of the seven parties out of the ten were bogus and they had been mentioned in the list of the petitioners with a view to show false credits. The character of the said parties being bogus and as not giving genuine loans but giving their names for credit became completely apparent. I say that in fact the disclosure by Pure Ice Cream was made two months after the passing of the order in the cases of the petitioner as well as Pure Ice Cream for the assessment year 1960-61. The result, therefore, was that when I found the names of the said seven parties as having advanced loans for 1957-58, I had reason to believe that the parties were bogus and as such the income had escaped assessment. The names of the said seven parties out of ten are as under: 1. Harbhagwandas Purshotamdas. 2. Ratanchand Gobindram. 3. Chetoomal Murlidhar. 4. Bhagwandas and Sons. 5. Lilaram Kewalram and Sons. 6. Gianchand Naraindas. 7. Parmanand Deepchand Hinduja." This affidavit is an after-thought. Firstly, Pure Ice Cream is an entirely different assessee and a different partnership concern having only two common partners. Secondly, reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact nor in law furnished any valid ground for forming a reasonable belief required by law. It is obvious that the Commissioner of Income-tax did not seriously consider the matter and had merely written "yes" against the front page of the appropriate column, while the reasons were written on the reverse page. The sanction, therefore, suffers from the infirmity pointed out by the Supreme Court in Chhugamal Rajpal's case. In the view I am taking of the matter, it is not necessary to decide whether the petitioner had in the instant case fully and truly disclosed all materials necessary for its assessment for the disputed year. The petitioner asserts that it had made full and true disclosure and it is supported by the first affidavit-in-opposition, but this fact is disputed in the subsequent affidavits. However, it is not necessary to decide this point. My conclusion, therefore, is that the Income-tax Offices did not have any reason to bona fide believe that any income chargeable to tax had escaped assessment. I also hold that the sanction of the Commissioner purporting to have been granted under section 151 of the Act is invalid and ineffective. As a result, I allow the writ pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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