TMI Blog1979 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ened the case of the petitioner under s. 147(a) read with s. 148 of the I.T. Act, 1961 (hereinafter called " the Act " ), and issued a notice to the assessee. Thereafter, on 14th September, 1962, the ITO, after considering the whole matter and seeing the original hundi counterfoils, came to the conclusion that the transactions in question were in order and thus the proceedings were dropped. Thereafter, the ITO issued another notice on 15th December, 1967, which is dated 4th December, 1967, and a copy of which is annex. B with the writ petition, pertaining to the same assessment year again reopening the case of the petitioner under s. 147(a) read with s. 148 of the Act. According to the petitioner, he made a representation to the Commissioner that the reassessment should not be reopened and he having reliably learnt that his representation has been rejected by the Commissioner, filed this petition under arts. 226 and 227 of the Constitution on 21st September, 1971, praying that the impugned notice issued under s. 148 of the Act, copy of which is annex. B to the writ petition, be quashed. It has been averred in the petition that the ITO had no material to hold that the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in 1963 and thereafter when large scale raids and investigations into the manipulations in Bombay, Calcutta and Madras markets brought to light this modus operandi. As a result of the classified information gathered from these investigations the various Commissioners of Income-tax, Bombay, Calcutta and Madras circularised particular information with regard to each havala dealer and the banks discounting such hundis to the Commissioners of Income-tax elsewhere. In turn this information was passed on by the Commissioner of Income-tax, Punjab to all the Income-tax Officers under him. On receipt of this information, the matter was further 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 petitioner-assessee. 9. That para. 9 of the petition is not correct. Action under section 1471148 can be taken any number of times on receipt of fresh information. As detailed above, in the instant case, there was voluminous fresh information in the form of classified information circulated by the various heads of income-tax department at Bombay, Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, but Shri Bhagirath Dass, the learned counsel for the petitioner, has advanced another argument, which, if accepted, will enjoin upon this court to quash the notice without going into the facts of the case. It has been vehemently contended by the learned counsel for the petitioner that in law if the assessment has been completed after due investigation regarding a particular assessment year on the basis of the facts mentioned in the return, then subsequently it is not open to the ITO to initiate the proceedings for reassessment under s. 147(a) of the Act, as, according to the learned counsel, the assessee having disclosed the material facts and the said facts having been found to be correct after due investigation, cannot be held to be guilty of having omitted to disclose fully and truly all material facts necessary, for his assessment for that year. With a view to appreciate the contention, the provisions of ss. 147, 148 and 149 of the Act may be reproduced as under: " 147. If (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven though the account books or other evidence from which material evidence could be, with due diligence, discovered by the ITO having been produced, the ITO will have jurisdiction to initiate the proceedings under s. 147(a) of the Act. However, it was contended by the learned counsel that it is not the duty of the assessee to disclose that the entries in his account books and, consequently, in the return, regarding the taking of a loan of Rs. 95,000 from five persons mentioned therein, were false. It has been contended that if the material facts necessary for the assessment are fully disclosed and after investigation the same have been accepted by the ITO, subsequently on further information having been received that the assessee's income has escaped assessment for that year on account of the assessee having concealed material facts or on account of his having given false facts, this cannot be the basis for the reopening of the assessment under the provisions of s. 147(a) of the Act, but the same may be reopened under the provisions of s. 147(b) of the Act for which the limitation is only four years. It was contended that the reassessment proceedings in the present case were initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urious creditors and the petitioner, one can hardly say that the assessee had made a full and true disclosure of material facts. Such a disclosure cannot lend facthood to transactions which in fact did not take place. What the assessee has done is that he disclosed certain spurious papers and particulars regarding certain transactions which were themselves not facts. The ordinary dictionary meanings of the word " fact " are " occurrence of event, things certainly known to have occurred or be true, reality; true or existent ". A particular transaction which has never taken place, cannot be held to be a disclosure of true facts. In such a case, it would be a mockery to hold that the assessee has made a full and true disclosure of facts. Thus, in such a case it is to be held that the disclosure made by the assessee is formal evidence of fictitious transactions which had never taken place and they are a mere cloak to cover up the facts. In such a case, the fullness and completeness of such a disclosure is immaterial. In fact the more copious the materials disclosed in a case like this, the more solid is the crust covering up the real facts. In a case of this type, it is, therefore, fut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable. The view, which we are taking, is supported by a number of decisions. In Full Bench case of the Calcutta High Court in Lakhmani Mewal Das v. ITO [1975] 99 ITR 296, the majority of judges took the view that disclosure of facts, which are non-existent, or supply of false information on the basis of which the assessment has been ordered, if found out to be false subsequently, would not entitle the assessee to take a plea that the provisions of s. 147(a) of the Act are not applicable. The majority judgment of the Calcutta High Court was affirmed by their Lordships of the Supreme Court in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. It is no doubt true that their Lordships of the Supreme Court decided the case on the second question holding that the grounds or reasons which lead to the formation of the belief contemplated by s. 147(a) of the Act, must have a material bearing on the question of escapement of income of the assessee because of his failure or omission to disclose fully and truly all material facts, but their Lordships held that once there exists reasonable grounds for the ITO to form the above belief, that would be sufficient to clothe him with jurisdiction to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as correct but the reasons given therein were not tenable. We respectfully agree with this observation. It may be pointed out at this stage that a learned single judge of this court in Karam Chand Kakkar's case, held that the ITO, in that case, had changed his opinion on account of subsequent information which had come into his possession and thus that was a case of change of opinion. Whether on the facts so disclosed by the assessee, the ITO has made an investigation or not, that, in our opinion, will not relieve the assessee of the liability to disclose fully and truly all material facts necessary for the assessment in question. Shri. Bhagirath Dass pointed out that the judgment of the learned single judge in Karam Chand Kakkar's case was affirmed by a Division Bench as the Letters Patent Appeal was dismissed. In our view the reasons given therein have rightly been held to be untenable by a subsequent Division Bench in Hazi Amir Mohd. Mir Ahmed's case [1977] 110 ITR 630 (P H) and we respectfully agree with the said observations. We may further observe that in Karam Chand Kakkar's case [1977] 93 ITR 198 (P H), the learned judge did not discuss the import of the word " truly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Bench of the High Court allowed the writ petition. This decision was upheld by their Lordship of the Supreme Court in appeal. On facts their Lordships came to the conclusion that the assessee was not guilty of suppression of facts which he disclosed fully and truly. Their Lordships further recorded a finding that the belief of the ITO was based on no material as their Lordships refused to rely on the affidavit of the ITO and in these circumstances the judgment of the High Court was upheld. The proposition sought to be put up before us now, that even if the facts disclosed by the assessee are not truly disclosed, yet in a given case, the provisions of s. 147(a) of the Act will not be applicable, was nowhere laid down by their Lordships of the Supreme Court in that case. We may also make mention of a jugdment of the Bombay High Court in Shriyans Prasad Jain v. R. K. Bhalla, ITO [1974] 94 ITR 34, wherein the learned judges held that on facts it was shown that the assessee was guilty of suppression of material facts which were not fully and truly disclosed and thus the initiation of the reassessment proceedings under s. 147(a) of the Act was valid. For the reasons recorded abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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