9911796707
TMI Blog1981 (11) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... d been accepted after investigation, In the second year with which we are concerned cash credits of Rs. 36,000 in the account of Surajmal Ganeshiram and Rs. 24,000 in the account of Amarchand Sureka were accepted after investigation by issuing summons to those persons concerned. In that year, Rs. 9,000 in the account of the assessee's mother was also sought to have been accepted. The total amount thus came to Rs. 69,000 for the second year. There was a disclosure petition filed by the assessee on or about 6th of July, 1967, before the Commissioner of Income-tax under s. 271(4A) of the I.T. Act, 1961, which account was rejected on the 25th April, 1974. The ITO, thereafter, started proceedings under s. 147(a) of the I.T. Act, 1961, for the assessment year 1962-63 on 15th January, 1971, and for the assessment year 1963-64 on 17th January, 1972, that is, before the rejection of the disclosure petition because the assessee stated that the amount of Rs. 27,000 in the account of Radhakishan Almal could be included in the assessment year 1962-63 and Rs. 69,000 for the assessment year 1963-64. It may be mentioned that though the disclosure petition has not been made a part of the document i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition inasmuch as this was done under a misconception and general circumstances and panic thereto prevailing at the relevant time. There was a general rumour that the creditors had appeared before the Revenue and had deposed that they were mere name-lenders and the Department would act on their statements. The assessee further stated that in order to avoid unnecessary litigation and to purchase peace of mind the assessee had offered for assessment certain deposits by spread over. It was further the case of the assessee that these deposits were duly considered and accepted at the time of original assessment after considering the evidence. Therefore, it was submitted that the proceedings under cl. (a) of s. 147 of the Act could not be taken for those two years. The ITO rejected this contention and included the amounts in the assessee's income for the two years. Being aggrieved by the said decision the assessee went up in appeal before the AAC. The AAC upheld the action of the ITO and rejected the appeal on this point. The assessee then went up before the Tribunal and contended that the proceedings under cl. (a) of s. 147 was improper and without jurisdiction. Reliance was placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which emphasis was laid on behalf of the assessee is that the obligation of the assessee was to disclose primary facts and not the inference to be drawn on such primary facts. It was also emphasised that the subsequent materials must have reasonable nexus with the formation of the belief that there was non-disclosure at the time of original assessment. It was submitted that the nature of a cash credit or whether these were loans or accumulated income is the inference to be drawn, as in this case the fact of cash credit had been disclosed and investigated and there was no nondisclosure or omission. Any subsequent view of the income character of these cash credits or the question whether these were really in the nature of the cash credits were an inference to be drawn from the basis of primary facts and the subsequent materials and the nature of the cash credit would be the invariable fact which the assessee had disclosed in the original assessment. This question has been the subject-matter of adjudication by the High Courts in several decisions. We need not refer to all those decisions in great detail. We might refer only to those decisions for the purpose of reiterating the law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he belief and were not extraneous or irrelevant to the purpose of the section. To this limited extent the Supreme Court reiterated that the action of the ITO in starting proceedings under s. 34 of the Act is open to challenge in a court of law. Facts of this case are different. We do not think it is necessary to discuss the facts. The Supreme Court have enunciated the principles or the limits of judicial review. The Tribunal has relied on certain observations of the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. There the original assessment for the assessment year 1958-59 was made on the assessee after allowing deduction of a sum of Rs. 10,494 towards interest to certain creditors. Thereafter by a notice under s. 148 of the I.T. Act, 1961, dated March 8, 1967, served on the assessee on March 14, 1967, the ITO sought to reopen the assessment. In his report made in February, 1967, to the Commissioner, for reopening the assessment of the assessee for the assessment year 1958-59 after four years under s. 147(a) of the I.T. Act, 1961, two reasons were mentioned : (i) M. K., who was shown to be one of the creditors of the assessee, had since confessed that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority decision on the ground that there was no live link established with the formation of the belief. Therefore, it was held that the statement in the original return should be a true statement, but if there is any material to doubt the truth or correctness of the statement then s. 147 can be resorted to. This was the view of the three judges, but in the case before the Calcutta High Court the majority held that the live link had not been established, while the view of the minority judges was that the live link had been established. The Supreme Court, though it noted the arguments on behalf of the assessee that the High Court's opinion was erroneous in dealing with the true nature of the transactions which the assessee was obliged to disclose and could not support the decision of the High Court, chose to confirm the decision of the majority judgment on the ground that the live link was not established in the facts of the case. This question was again considered by the Supreme Court in the decision in the case of ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1 (SC) upon which great reliance was placed. In that case in the original assessment of the assessee for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count showing payment of interest and it was for the ITO to investigate and determine whether these documents were genuine or not the assessee could not be said to have failed to make a true and full disclosure of the material facts by not confessing before the ITO that the hundis and the entries in the books of account produced by it were bogus. It was further held in that case as the ITO had in the second affidavit merely stated his belief but did not set out any material on the basis of which he had arrived at such belief, there was nothing on the basis of which the court could be satisfied on the affidavit that, he had reason to believe that a part of the income of the assessee had escaped assessment by reason of its failure to make a true and full disclosure of the material facts. Reliance was placed on the observations of the Supreme Court appearing at pp. 4 and 5 of the report. The Supreme Court, therefore, relied on the observations in the case of CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609 (SC). The Supreme Court was of the view that there was no obligation on the part of the assessee to disclose the inference to be drawn from the primary facts. The impression of the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons (sic). Secondly, it was held that the conditions for re-opening had not been fulfilled. As we have mentioned hereinbefore, the section requires formation of a tentative belief that there was failure or omission on the part of the assessee to disclose all material facts at the time of the original assessment. That belief must be formed on the material facts which have come to the knowledge of the Revenue or to the knowledge of the ITO subsequently if there is an original assessment. The materials must have reasonable nexus or connection with the formation of the belief and the materials must be such on which a reasonable man could form a tentative belief that at the time of original assessment the assessee had not disclosed the real facts or the materials. From the judgment it appears that the assessee had made two statements in the original assessment and books and records were produced to the effect that certain amounts represented the cash credit in the year in question. If the statements made in the disclosure petition are correct, which we have set out hereinbefore, the statement in the original assessment and records produced could not be correct. In the subsequent disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of Smt. Ichhabai Panchal v. CWT in I.T. Reference No. 220 of 1977, judgment delivered on April 22, 1981 since reported in [1982] 137 ITR 232 (Cal). We are not concerned with the question whether the statement in the disclosure petition under s. 271(4A) could be considered to be sufficient material calling for the imposition of the penalty. Similarly, our attention was drawn to certain observations in the case of CIT v. Rajaram Pannalal & Brothers [1981] 127 ITR 679 (Cal). Here also the same question was concerned: namely, the effect of the disclosure petition under s. 271(4A) imposing penalty. Learned advocate for the assessee also drew our attention to certain observations of the Madhya Pradesh High Court upon which the Tribunal had relied in the case of Addl. CIT v. Kanhaiyalal Jessaram [1977] 106 ITR 168 and our attention was drawn to the observation of the court at pp. 170-171 on the effect of acceptance or non-acceptance of the disclosure petition under s. 271(4A) of the Act. We may mention that looked at from one point of view the question of acceptance or non-acceptance of the disclosure petition might not be relevant in deciding whether there were materials b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
