TMI Blog1987 (1) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ount. The assessee had some hundi transactions which were found recorded in its books maintained for the assessment year 1961-62. During the course of assessment proceedings before the Income-tax Officer for the assessment year 1961-62, the assessee filed a copy of the accounts of the creditors as appearing in the ledger with their addresses. The Income-tax Officer sent an intimation slip to the Income-tax Officer under whose jurisdiction the creditors were doing business. He did not wait for the reply from the Income-tax Officer concerned and completed the assessment on November 29, 1961. In this reference, we are concerned with the assessment year 1960-61. The original assessment for this year was completed much earlier on February 2, 1961. The assessments for both the years mentioned above were completed under the provisions of the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act of 1922"). Subsequently, after the completion of the above assessments the assessing officer got information that the loans could not be verified in fact, the creditors had been treated as bogus hundi brokers by the Income-tax Officer, Hundi Circle. From the statement of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional plea before it to the effect that no part of the two hundi credits could validly be assessed in the assessment year 1960-61, but could only, if at all, be assessed in the assessment year 1961-62, having regard to the provisions contained in section 297(2)(d)(ii) of the Act of 1961. The precise argument of the assessee was that since the action for reassessment was taken under section 148 of the Act of 1961 and the reassessment was also completed under that Act, assuming the two credits represented income from undisclosed sources, it could only be assessed in the assessment year corresponding to the previous year on the basis of which it maintained its books and the credits were found recorded. In other words, the assessee's case was that the disputed amount could be brought to tax only in the assessment year 1961-62. In support of its case, the assessee relied upon the words " all the provisions of this Act shall apply accordingly " used in section 297(2)(d)(ii) of the Act. The stand taken by the assessee was resisted by the Revenue. According to it, the phrase " all the provisions of this Act shall apply accordingly " meant only the machinery provisions and within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year after the year ending on the 31st day of March, 1940,-... (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section 149 or section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly." In view of the decision of the Supreme Court in Govinddas v. ITO [1976] 103 ITR 123, the view taken by the Income-tax Appellate Tribunal cannot be sustained. While construing the provisions of section 297 and the phrase " all the provisions of this Act shall apply accordingly " used in that section, the Supreme Court has held as under (at page 134): " These words merely refer to the machinery provided in the new Act for the assessment of escaped income. They do not import any substantive provisions of the new Act which create rights or liabilities. The word 'accordingly' in the context means nothing more than 'for the purpose of assessment' and it clearly suggests that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urts were also brought to our notice, in which the unanimous view taken is that the provisions contained in section 68 of the Act of 1961 are substantive in nature (See Bhogilal Virchand v. CIT [1981] 127 ITR 591 (Bom), CIT v. Dharamchand Anandkumar [1981] 128 ITR 219 (MP), CIT v. Kashiram Agrawalla [1984] 147 ITR 797 (Pat) and CIT v. Ambaji Traders Pvt. Ltd. [1984] 148 ITR 401 (Bom)). Relying on these decisions, learned standing counsel for the Department urged that the assessment as found by the assessing officer was perfectly in order. As stated earlier, it is not necessary for us to analyse the provisions of section 68 of the Act and we accordingly refrain from going into the matter. We will now take up question No. 1. As stated earlier, all the hundi credits including the two assessed in the year 1960-61 were found recorded in the account books of the assessee maintained for the assessment year 1961-62. It was during the course of the original proceedings for this year that the assessee may have brought on record the names and addresses of the creditors. In the original proceedings relating to the year 1960-61, no disclosure, much less full and true, was made with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year)." We are concerned in this question as to whether the reopening was valid under clause (a) of section 147. Under this clause, it is obligatory on the part of the assessee to disclose fully and truly all material and relevant facts. Clause (a) of section 147 applies when either no return has been filed or when a return is filed but there is still a failure to disclose fully and truly all material facts which have resulted in the escapement of any income. If any of these factors are missing, the Income-tax Officer will have no jurisdiction over the escaped income. For the application of this clause, there must be failure to disclose fully and truly all material facts necessary for the assessment " for that year " or failure to make a return " for any year The expressions used in this clause are " for that year " or " any year The correctness of the first part of the Tribunal's finding will depend on the true import of these w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found recorded in its books maintained for the assessment year 1944-45. This disclosure was made when the proceedings for the assessment year 1943-44 were pending before the Income-tax Officer, the year in which those deposits could be assessed as income from undisclosed sources taking the financial year as the corresponding previous year. This court ruled asunder (vide headnote) : " The Income-tax Officer had noticed the cash credits before February 22, 1947, and, on that date, after considering the explanation of the assessee, he had become aware of the true nature and source of the deposits, namely, that they were the assessee's income from undisclosed sources. At that time the assessment proceedings for 1943-44 were pending and if the Income-tax Officer had been aware of the correct legal position, there could have been no difficulty in the assessment for the year 1943-44. Therefore, the income ......... could not be said to have escaped assessment because of the failure or omission on the part of the assessee so as to attract the provisions of section 34(1)(a) of the Act." In the instant case, the assessee did not disclose the huge deposits amounting to Rs. 50,000 at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stated above, having regard to the nature of the information that was given in the assessment year 1961-62, it is not possible for us to hold that the assessee had discharged the obligation cast on it under clause (a) of section 147 to make a full and true disclosure of primary facts necessary for its assessment. All that was done by the assessee, as per the finding of the Tribunal, was that a copy of the creditor's account was furnished before the assessing officer in the assessment proceedings for the year 1961-62. This was not sufficient to exonerate the assessee of its obligation under clause (a) of section 147. It is settled law that the fact that there is vague information before the Income-tax Officer at the time of the original assessment is not sufficient to take the case out of the obligation on the part of the assessee to disclose fully and truly all material facts. And further the fact that the Income-tax Officer could have made an enquiry into the matter, but did not do so, does not take the case out of the scope of section 147(a) as the assessee had failed to place truly and fully all material facts. These tests were laid down by the Supreme Court in CIT v. T.S.PL.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reference, vide its order dated April 22, 1977, this court observed : "The other questions are not being called as, in our opinion, they are covered by question No. 1." In these circumstances, we must proceed on the footing that question No. 1 is wide enough to include the last finding of the Tribunal referred to above. We accordingly proceed to examine the case with reference to the last finding of the Tribunal. The Tribunal has invalidated the assessment by saying: " From the report of the Income-tax Officers, it is nowhere clear that the loan creditors were not genuine. The report has simply indicated that the loan could not be verified. There are several factors by which the loan could not be verified, still the loan may be genuine. Therefore, if the Income-tax Officers concerned under whose jurisdiction the creditors were doing business were not able to verify the loans, the loans could not be taken as non-genuine. And, therefore, we cannot say that the Income-tax Officer had any reason to believe that income had escaped assessment during the year on account of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 147(a) was upheld by the Punjab and Haryana High Court as would appear from the headnote of the report reproduced below: " Where the proprietor of a money-lending concern himself makes statement that the loans alleged to have been advanced by his firm to various concerns were all bogus, it is open to the Tribunal to act on such a statement and infer that the assessee-firm has failed to prove the genuineness of the cash credits of the amounts shown as loans taken from the money-lending concern. Where an assessee disclosed loans in the names of certain hundi dealers and subsequently one of the hundi dealers stated that the loans in the name of his concern were not genuine there is no true disclosure of material necessary for assessment and reassessment proceedings can be taken under section 147(a) of the I.T. Act, 1961. Once a finding is arrived at that the assessee-firm made false entries in its books of account and there is the additional evidence of the money-lending dealer to the effect that he had been indulging in name-lending only, it is open to the Tribunal to come to the conclusion that the assessee-firm had indulged in deliberate concealment of income and to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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