TMI Blog1988 (11) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... ebiting the purchase account with inflated purchases equal to the amount drawn by forged cheques. The purchase account had been inflated to the extent of the embezzled amounts, for each of the accounting years ending 31st March relevant to each of the assessment years. The total sum misappropriated was Rs. 48,346, Rs. 75,030, Rs. 74,366 and Rs. 60,413 respectively. On this information, the Income-tax Officer reopened the assessments. The assessee filed returns showing the income originally assessed, accompanied by a covering letter dated March 25, 1966, in which it challenged the proceedings initiated under sections 147(a) and 148 of the Income-tax Act, 1961 ("the Act" for short). The said returns were filed under protest and without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the matter before the Tribunal in appeals which were disposed of by a common order. Before the Tribunal, the Revenue contended that since there was a reasonable prospect of the recovery of the amount from the bank, the loss could not be allowed in that year. Therefore, the order of the Appellate Assistant Commissioner has got to be set aside. On the assessee's contention that the reopening of the assessment under section 147(a) of the Act was wrong, the TribuRal held that the case of the assessee fell clearly under section 147(a) of the Act as it was a case of failure to disclose fully and truly all the material facts, and, therefore, the assessments were rightly reopened. Aggrieved by the said order, at the instance of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or failed to disclose something when, of such thing, he had no knowledge. A similar implication is carried by the word 'disclose', because one cannot be expected to disclose a thing or said to have failed to disclose it, unless it is a matter which he knows or knows of. " Indeed, this view was reiterated by the Calcutta High Court in ITO v. Calcutta Chromotype Pvt. Ltd. [1974] 97 ITR 55, and in this context the contention urged by learned counsel appearing in that case was referred to in the following manner (at page 60) : "Mr. Ginwalla has submitted that no one, not even an assessee before the Income-tax Officer, can be expected to disclose what he does not know and was able to place before us an observation occurring in the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to disclose the facts only if it is a matter which one knows. Further, this view gets reinforced by looking at clause (b) of section 147. Clause (b) deals with a situation where there is no omission or failure as mentioned in clause (a). Therefore, in cases where there is no such omission or failure, then the obligation to disclose fully and truly does not arise and in such a case, there is no omission or failure. Even in the absence of such omission or failure, clause (b) would be attracted. However, Sri Srinivasan, learned counsel for the Revenue, contended that since the expressions "omission", "failure" and "disclose" are used in the provision, each of them will have to be given a separate meaning and hence omission or failure hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn in order to invoke section 147(a) of the Act. We are afraid this contention is misconceived. The requirement of the section is that there is a duty cast upon the assessee to disclose fully and truly all material facts. That duty can be said not to have been discharged only when he does not place all the material facts necessary for the assessment or falsely states the facts in the returns. Therefore, if the facts stated are false, then there is no question of attributing any knowledge to the assessee because when stating that the matter is false that by itself will indicate that the assessee had knowledge of the same. So far as incomplete particulars being furnished is concerned, inasmuch as the assessee had no knowledge of the same, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first question referred to us in each of these cases has got to be answered in the negative and in favour of the assessee. On the second question referred to us, we are of the view that in view of the decision of the Supreme Court in the case of Associated Banking Corporation of India Ltd. v. CIT [1965] 56 ITR 1, to the effect that so long as there is a reasonable prospect of recovering the amounts embezzled, loss cannot be allowed in the year in question. Therefore, in the present case, when the assessee had succeeded in all the courts as to the recovery of the amounts embezzled against the defendant which is nationalised bank and recovery from such an institution cannot be said to be impossible or difficult, we are of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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