TMI Blog1974 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... wlal Jain, who is the proprietor of the said Murshidabad jute Co. The ITO, accordingly, disallowed the said interest. He recorded that what Sewlal Jain had done was to lend the name of Murshidabad jute Co. to the assessee in order to accommodate the assessee to introduce its concealed income in the form of loans in the accounting year corresponding to the assessment year 1963-64. Therefore, according to the said ITO, the credits aggregating to, Rs. 90,000 figuring in the books of the assessee-company in the name of Murshidabad jute Co., in fact, represented concealed income of the assessee. He, accordingly, directed reopening of the assessment under cl. (a) of s. 147 of the I.T. Act, 1961. Thereafter, there was an appeal to the AAC for the assessment year 1964-65 and the AAC passed an order on August 22, 1968. Before that, on March 22, 1968, notice under s. 148 of the I.T. Act, 1961, was issued to the assessee reopening the assessment for the assessment year 1963-64. In the appellate order of the AAC for the year 1964-65, the AAC observed that the transaction with Murshidabad jute Co. started from October, 1961, and ended in June, 1962. The AAC further observed that the company had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed and judgment delivered on June 2, 1972, the learned judge has made the rule nisi absolute and quashed the said notice. This appeal arises out of the aforesaid judgment and order passed by B. C. Mitra J. on June 2, 1972. The question involved in this case is whether the conditions precedent for the issuance of the notice under s. 148 have been fulfilled in this case. This notice was issued as mentioned hereinbefore under cl. (a) of s. 147 of the I.T. Act, 1961. In order, therefore, to sustain this notice it is necessary to find out whether the ITO had formed the requisite belief that income of the assessee had escaped assessment or had been underassessed as a result of any omission or failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment. It is further necessary to enquire whether there were materials for the ITO to form that belief and if so whether these materials have a rational nexus to the formation of the belief, if any, formed in this case. As mentioned hereinbefore, the ITO who issued the impugned notice was the ITO who has made the assessment for the subsequent year, namely, for the assessment year 1964- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of issuance of the notice. This proposition is well settled by the scheme of the I.T. Act and for this no authority is needed. Indeed, counsel for the respondent did not seriously dispute this proposition. What he contended, however, was that though the subsequent information would not confer or take away the jurisdiction of the ITO, the subsequent determination by a higher authority about the quality of the information was a relevant factor to be taken into consideration in determining the nature of materials upon which the ITO acted. In so far as it is stated that the subsequent determination by a higher authority as to the quality of the basis of the information is a relevant factor, in our opinion, cannot be disputed, but in this connection, it has to be borne in mind that the AAC for the assessment year 1964-65 did not make any finding that there was any regular and genuine transaction of money-lending. What he held, however, was that the said Murshidabad Co. was doing genuine jute business up to the middle of 1962 and the transaction related to this period. Therefore, according to the AAC, on the basis of the confession regarding the bogus money-lending business aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision referred to in the said Full Bench decision it was held that a confession of this nature could not be the reason for reopening the assessment of the assessee. In the instant case, however, there is not only a confession but a finding recorded at the time of the assessment for the subsequent year that the transaction in question was not genuine. That finding is not the finding recorded by any other officer but the officer who has issued the impugned notice. In so far as the confession was that the money-lending business was done after the middle of June, 1962, it appears that it cannot be said that that was the only inference or conclusion from the said confession because it is stated that Jamakharcha is an expression which means name-lending. This Jama kharcha business was done, according to the confession, by the Murshidabad jute Company for the last six or seven years prior to the date of the confession, that is to say, 24th of March, 1965. If in that light the confession is read or considered then the confession implied that the transaction in the name of Murshidabad Jute Company with the assessee for the relevant year was nothing but name-lending. The fact that a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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