TMI Blog1976 (9) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... undi loans and the assessee-firm also claimed credit for the interest alleged to have been paid on such loans. The Income-tax Officer making the assessment accepted the loans to be genuine and granted credit for the interest a leged to have been paid on such loans. On March 30, 1970, the successor-in-office of the Income-tax Officer, "I" Ward, Hundi Circle, Calcutta, issued the impugned notice under section 148 of the said Act proposing to reassess the income for the said year 1961-62 on the ground that he had reason to believe that the assessee's income chargeable to tax for the assessment year 1961-62 had escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. The notice further recited that such a notice was being issued on obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal-I. The respondent disputed the validity of such a notice under section 148 and the proceedings for reassessment based on such a notice in a writ petition on which the above rule was issued. According to the respondent the impugned notice was not based on any reasonable belief and, in any event, there were no materials on which any such bona fide belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was further disputed that the satisfaction recorded by the Commissioner was not in accordance with law. In a reply filed by the respondent there was a categorical denial that, at the time of the original assessment, the assessee-firm had not disclosed the list of hundi loans. On the other hand, it was specifically asserted that all loans were truly and faithfully disclosed to the Income-tax Officer making the original assessment and he having accepted the same to be genuine it was not, open to the successor to say that they are not so and thus to initiate the proceeding for reassessment. The learned judge in the trial court appears to have accepted the case of the respondent that the hundi loans were disclosed by the assessee-firm at the time of the original assessment. On acceptance of such a case the learned judge proceeded to hold that there being no omission or failure on the part of the assessee to disclose truly and fully the material facts at the time of the original assessment and the Income-tax Officer having accepted such loans as genuine with due knowledge of such facts, the successor- Income-tax Officer, when he formed the belief that such hundi loans were not ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessment and thus concealed a part of its income which when found out could furnish valid grounds for reassessment. Secondly, it has been contended by Mr. Banerjee that the hundi loans having been disclosed it was for the Income-tax Officer making the original assessment to find whether they are genuine or not and when they were accepted as genuine by the said officer, it is not open to the successor to hold a different view and initiate a proceeding for reassessment. Mr. Banerjee has further supported the conclusion of the learned judge in the trial court that, in any event, facts will establish the position that there was no application of mind by the Income-tax Officer when he proceeded to initiate the proceeding for reassessment and on the other hand he merely signed a set and cyclostyled record of reasons and thus proceeded mechanically which is not within the sanction of law. What are the requirements of sections 147 and 148 of the said Act which correspond substantially to section 34 of the old Act of 1922 have been the subject-matter of judicial decisions in a number of cases. The point has been considered by the Supreme Court itself in a number of cases starting from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the law or making a different inference from facts disclosed, which leads the Income-tax Officer to conclude that there had been an escapement of assessment, would not also furnish any ground for initiation of a proceeding under section 147(a) of the said Act. Applying the test, as aforesaid, to the facts of the present case we are unable to agree with the first conclusion arrived at by the learned judge in the trial court. On the materials now before us we agree with the learned judge in the trial court that the assessee did disclose the hundi loans in the original assessment proceeding. An assertion to the contrary in the affidavit of the Income-tax Officer is clearly incorrect in view of the uncontroverted disclosure made in annexure. "A" series in the writ petition. Exhibit A-2 goes to show that the list of hundi loans were disclosed at the time of the original assessment. But such fact by itself does not lead to the other conclusion that escapement of assessment, if any, was merely the result of a different view taken by the successor-Income-tax Officer. The assessee was required not only to make full disclosure of all facts relevant to the assessment but also a true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject-matter of an inference from the proposition itself or from false materials created to justify the proposition." Mr. Banerjee, appearing on behalf of the respondents, has, however, strongly contended that, on the materials disclosed, the Income-tax Officer could not have at all formed any bona fide belief that the loans were not genuine or that any part of the respondent's income for the relevant period has escaped assessment due to any untrue disclosure of facts. Strong reliance has been placed on the Full Bench decision of this court above referred to and the two decisions of the Supreme Court in the case of Chhugamal Rajpal v. S. P. Chaliha [1971] 79 ITR 603 (SC) and Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). In the latter case, the Supreme Court affirmed the above Full Bench decision of this court. In Chhugamal's case [1971] 79 ITR 603 (SC) the reason assigned by the Income-tax Officer was that the assessee at the time of original assessment had shown certain loans from certain persons who, on subsequent information, appeared to be name-lenders. "Hence proper investigation is necessary." The Supreme Court found that the particulars of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials on which he has proceeded could reasonably furnish any foundation for the belief, would always depend on the particular facts of each case. It would be a matter for the court to decide on a consideration of all relevant facts and circumstances of each case. Now, in the present case, the reason assigned by the Income-tax Officer as given in his report to the Commissioner is as follows : "It appears from the records that the assessee obtained hundi loans from various parties during the relevant year. These loans are found to have been accepted in the original assessment as genuine as claimed by the assessee without making any verification. Now, it transpires that the alleged loan credits also include certain credits in the name of, (1) Girdhari Singh J. Singh, (2) Kanayadass Hotchand, (3) Govindaram Nichaldas, etc., which have subsequently been found to be not genuine. Therefore, I have reasons to believe that the loans in question are not genuine and these are the assessee's concealed income which has escaped assessment on the assessee's failure to disclose truly and fully all materials facts that were necessary for its original assessment." Reading the reason thus assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is right in his finding that the reasons recorded in the separate sheet are recorded in a cyclostyled form. Though we agree with the learned judge in his conclusion that in recording the belief the Income-tax Officer must do so in a bona fide manner and cannot proceed to do so in a mechanical manner, yet from the mere fact that the reasons have been recorded in a cyclostyled manner, we are unable to conclude, as has been concluded by the learned judge in the trial court, that there had been no application of mind by the Income-tax Officer or that he has proceeded in a mechanical manner. Cyclostyling the reasons might have been a necessity for very many reasons. That alone does not render the act mechanical (S.K. Ibrahim v. State of West Bengal AIR 1974 SC 736). In the present case the reason itself as recorded goes to show that certain loan credits, particulars whereof have been set out in the reason itself, are stated to be not genuine. Those loan credits are all related to the original assessment. Thus, it was not a case of a cyclostyled record of a part of a statutory provision. The very reference to particular facts having a bearing on a particular assessment would go to show ..... X X X X Extracts X X X X X X X X Extracts X X X X
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