TMI Blog1982 (2) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee. The addition so made by the ITO was upheld in appeal by the Tribunal. It is the case of the revenue that subsequently the ITO learnt that there was a hundi racket all over the country and a number of hundi bankers had confessed that they had been doing hawala business meaning thereby that they had not given any genuine loans to the parties concerned, but had only lent their names for such loans. The ITO found that six of the bankers or brokers who are shown to have advanced loans to the applicant were such parties, as referred to above. The names of these parties are detailed below : (i) Didar Singh Charan Singh, (ii) Kabul Co. Traders, (iii) Man Singh Wadhwa, (iv) Mool Chand Chander Bhan, (v) Jetha Nand Sons, (vi) Sohan Singh Paras Ram. On the basis of the above information, the ITO initiated proceedings under s. 147(a) of the I.T. Act, by issuing the necessary notice under s. 148, to the applicant. This notice was actually served on one Khem Singh, who is stated to be the attorney of the applicant Jai Singh. It is not disputed that Jai Singh during the relevant period, was a " non-resident " and was residing at Kabul. There is no dispute in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been laid by the learned counsel on the fact that at the time of the initial assessment by the ITO complete list of hundi loans and the parties from whom the same had been taken, had been provided to the ITO. In fact, the ITO after scrutiny of the list of such loans, had ruled out the benefit of hundi loans obtained from fifteen parties and had, therefore, added a sum of Rs. 29,400 in the total income of the applicant for being assessed to tax, which fact showed that the ITO had applied his mind to this aspect of the matter. It is further contended that the hundi loans obtained from six other parties, who are now being dubbed as bogus parties, were also mentioned in the original list. This fact is apparent from a perusal of the second assessment order made by the ITO (annex. " B "), in which the names of the six parties referred to above, are shown at serial Nos. 16 to 21. The ITO in the said assessment order, however, reconsidered the hundi loans of these six parties, and while doing so, made a general observation to the following effect : " There is an information available with the department that the party has indulged in hawala business. This fact was confirmed by surrender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7): " The reasons for the formation of this belief contemplated by section 147(a) of the Income-tax Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that the eye must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that the has been escapement of the income of the assesses from assessment in the Particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment. At the same time we have to be in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assesses from assessment. The fact that the words definite information which were there in section 34 of the Act of 1922 at one time befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We do not see any distinction at all between Burlop Dealers' case [1971] 79 ITR 609 (SC) and the present one and the language of s. 147(a) being identical with that of s. 34(1)(a) the ratio of the decision in Burlop Dealers' case must govern the decision of the present case. We must, therefore, hold that there was no failure on the part of the respondent to disclose fully and truly all material facts necessary for its assessment and the condition for the applicability of s. 147(a) was not satisfied. We may also point out that though it was contended in the writ petition that the ITO could have no reason to believe that any part of the income of the respondent had escaped assessment by reason of its failure to make a full and true disclosure of material facts, the ITO did not disclose in his affidavit any material on the basis of which it could be said that he had come to the requisite belief. All that the ITO stated in his affidavit was that he discovered that the transactions of loan against security of hundis were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewaram, Meghraj Vasudev, Ram Chand Meghraj. All the statements were recorded before the impugned notice was issued to the petitioner. In the statement recorded, the persons mentioned above clearly stated that all the loans shown against their names were bogus and they did not in fact advance any loan from their own pockets. The statements contain the detailed procedure which was being followed in connection with the hawala hundis. Further more, in the return, a portion of which has already been reproduced in this earlier part of the judgment, it has been categorically averred that the matter was investigated with regard to the petitioner's dealings with these five Parties and it was found that this was a clear case of escapement of income through deliberate concealment on the part of the assessee. The contention of Shri Bhagirath Dass, the learned counsel for the petitioner, that in the statement of the persons referred to in the earlier paragraph of the judgment, there is no reference of the name of the petitioner's firm and, therefore, the said statements should be taken to be not relevant material, is without any merit. When the bogus hawala hundi proprietors, namely, Meghraj, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation, Mr. Awasthy submits that we may also adopt the same course as was adopted by the Bench in the abovementioned case, and answer the questions referred, in the same terms. We do not think that on the facts and circumstances of the present case, such a course is warranted. The duty is cast upon the revenue to show that there is any taxable income of the assessee, and not upon the assessee to prove the converse. In so far as the present case is concerned, as already noticed, the case of the assessee was reopened by the ITO on the basis of a vague information that certain firms were engaged in the racket of hawala business, and the farthest that the revenue has been able to reach, is that the six firms whose names are mentioned in the earlier part of the judgment, were also found to be members of the said group of firms. There is, however, neither any allegation nor evidence to show that these six firms had entered into bogus transactions with the applicant in this case. This being so, the present case would be covered by the dictum of the Supreme Court in Lakhmani Mewal Das' cage [1976] 103 ITR 437 and Madnani Engineering Works Ltd. case [1979] 118 ITR 1 which were follo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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