TMI Blog1976 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ect that they were lending names and not money. Thereupon, the Income-tax Officer issued a notice to the assessee under section 148 of the Income-tax Act, 1961, reopened the assessment and added a sum of Rs. 1,60,000 to the income of the assessee. The appeals filed by the assessee to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal were dismissed. Before the Income-tax Appellate Tribunal, it was contended that the assessee had made a true and full disclosure of all primary facts even at the time of the original assessment and, therefore, the Income-tax Officer was not justified in reopening the assessment under section 147(a). The Income-tax Appellate Tribunal disagreed with the submission of the assessee and held that the Income-tax Officer was justified in reopening the assessment. At the instance of the assessee, the Tribunal has referred to us the following question for our opinion: Whether, on the facts and in the circumstances, the Income-tax Appellate Tribunal, Chandigarh, has rightly upheld the reopening of the assessment under section 147(a) of the Income-tax Act, 1961?" Shri Bhagirath Dass, learned counsel for the assessee, argued that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomorrow change his mind and propose to reopen the assessment on the basis of a different possible inference from the same facts. The Income-tax Officer cannot be heard to say that it was the duty of the assessee to disclose the primary facts as well as the several different inferences possible from the primary facts. On the other hand, if the Income-tax Officer has reason to believe that primary facts were not fully disclosed or that they were not truly disclosed, he may reopen the assessment. This he may do either because fresh facts come to light which were not previously disclosed or because new light thrown on facts previously disclosed tends to expose the untruthfulness of such facts. In Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC) the Supreme Court held that while the assessee was bound to disclose truly and fully all primary facts, the assessee was under no obligation to point out the factual inferences which might be drawn from those facts. They said: "There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee..... Does the duty, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is under no obligation of further informing the Income-tax Officer that some of the entries in his account books or in the balance-sheet are false. It is for the Income-tax Officer to scrutinise the accounts of the assessee and after being satisfied as to their correctness to make the assessment. It is true that as stated in Explanation 2 to section 147 of the Act the mere production before the Income-tax Officer of the account books or other evidence from which material evidence could, with due diligence, have been discovered by the Income-tax Officer, will not necessarily amount to disclosure within the meaning of that section. But, in the present case, the Income-tax Officer, at the time of the original assessment, specifically required the assessee to prove the cash credits standing in the names of all the firms including the five firms mentioned in the earlier part of this judgment and the petitioner-firm satisfied the Income-tax Officer about the genuineness of those accounts...... It is thus apparent that the Income-tax Officer has changed his opinion on account of subsequent information which has come into his possession. It was the duty of the Income-tax Officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law." After stating the legal position, Khanna J. proceeded to apply it to the facts before him which were as follows: The Income-tax Officer mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia basis and the hundi racket became a notorious fact, the Income-tax Officer found that the credits shown in the names of the parties were merely name-lending credits based on hawala business and as there were confessional statements of the creditors or the creditors had been proved to be merely lending their names without lending the money, were indulging in hawala business, he reopened the case under section 147(a). We have seen his reasons to believe and we are satisfied that the Income-tax Officer was within his right to reopen the case under section 147(a) because his reasons to believe were covered by section 147(a)." Of course, the breaking of a hundi racket on an all-India basis cannot have any rational connection with the loans to the assessee but the confessional statements of the creditors may have. That depends on whether the confessional statements are related in any manner to the loans to the assessee. That information is not available in the order of the Tribunal out of which the reference arises or in the statement of the case submitted to us by the Tribunal. Therefore, the only answer which we can give to the question referred to us is to say that the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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