TMI Blog1974 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1958-59 was lawfully and validly issued by the Income-tax Officer. The case of the assessee in the petition mainly is that the said notice has been issued improperly and illegally as the conditions precedent to the assumption and exercise of power for reopening an assessment under section 147(a) are not satisfied in the instant case. It is the case of the assessee that there was, and there could be, no material which could lead to the formation of any belief on the part of the Income-tax Officer that the income of the assessee for the relevant year escaped assessment due to any failure or omission on the part of the assessee to disclose fully and truly all the material facts which were necessary for assessment of the assessee for the relevant year. Dr. D. Pal, learned counsel appearing in support of the application, has contended before us that there was no material which could lead to the formation of any belief on the part of the Income-tax Officer that the income of the assessee during the relevant assessment year escaped assessment due to default on the part of the assessee to disclose fully and truly all the material facts relating to the assessment of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee. Information which came to light subsequently showed that these hundi lenders indulged in the business of bogus accommodation and some of them (as, for example Giridharidas Raghomal and Giridhari Singh Jhaman Singh) have confessed that the loans shown to their names were mostly bogus, at least the loans shown to the assessee by the said lenders were bogus. Hence, it has become necessary to reopen the assessment to tax the said amount which appears to be concealed income of the assessee which has escaped assessment." The recorded reasons were signed by the Income-tax Officer on January 29, 1966, and the sanction of the Commissioner was accorded on February 24, 1966. The confessional statements referred to in the recorded reasons of the Income-tax Officer were also produced before us at the hearing of the application. One of the confessional statements was produced in its original and a cyclostyled copy of the other confessional statement was produced and it was said on behalf of the department that the original of the said confessional statement had been sent to Bangalore. Dr. Pal has contended that the recorded reasons in the instant case do not constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 of the Act of 1961. Mr. Pal contends that the requirements of section 147(a) which are in the nature of conditions precedent to the exercise of jurisdiction and power of reopening the assessment are clearly satisfied in the instant case. Mr. Pal has submitted that the position in law is well established and the question is one of application of the settled principles to the facts of a particular case. Mr. Pal has argued that whether there are materials or not will necessarily depend on the facts of a particular case and it is the contention of Mr. Pal that in the instant case the fact that two of the alleged hundi creditors have made a confession and they have confessed that the loans to the assessee were not genuine loans constitutes sufficient material to enable the Income-tax Officer to exercise his power and jurisdiction under section 147(a) of the Income-tax Act. Mr. Pal has submitted that this court is not concerned really with the adequacy or sufficiency of the reasons and the court has only to enquire whether there is any material which can lead legitimately to the formation of a prima facie belief on the part of the Income-tax Officer that the income of the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law." As the principles of law are, in our opinion, well-settled, we do not consider it necessary to deal with the other cases cited from the Bar. The established principles which, in our view, are applicable in the instant case may be stated as follows: (1) Before the Income-tax Officer can assume and exercise jurisdiction to issue the notice under section 148 to the applicant-assessee, other conditions laid down in section 147(a) must be fulfilled. The two conditions which are prescribed by section 147(a) are: (i) the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to income-tax have been under-assessed; and (ii) the Income-tax Officer must have reason to believe that such under-assessment had been made by reason of omission or failure on the part of the asssessee to disclose fully and truly all the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are indeed indicated. If we were to decide this case only on the materials contained in the affidavit-in-opposition, we would have undoubtedly held that the statements made by the Income-tax Officer did not disclose any material which could lead to the formation of any reasonable belief. The recorded reasons which have been produced before us, in our opinion, establish that there was material which could lead to the formation of belief on the part of the Income-tax Officer that the income of the assessee escaped assessment due to failure on the part of the assessee to disclose fully and truly all the material facts necessary for the purpose of assessment of the assessee in the relevant year. The recorded reasons indicate that two of the alleged hundi creditors, whose loans in the relevant assessment year had been accepted to be genuine, subsequently confessed that the loans alleged to have been given by them to the assessee were not genuine. The confessional statements which were produced before us substantially bear out the statements made by the Income-tax Officer in his recorded reasons which were placed before the Ccmmissioner. This fact that two of the alleged hundi creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Das's case and the decision of the Supreme Court in Chhugamal Rajpal's case turned necessarily on the particular facts of those cases. The facts of the present case, in our opinion, are different. In the case of Chhugamal Rajpal, before the Supreme Court or in the case of Lakhmani Mewal Das, there was no statement in the recorded reasons of the Income-tax Officer to the effect that any particular alleged hundi creditor has made a statement that the hundi loan alleged to have been granted by him to the assessee is bogus. In the case before us that statement appears in the recorded reasons of the Income-tax Officer and, in our opinion, that constitutes sufficient material on the basis of which the Income-tax Officer can reasonably believe that the income of the assessee has escaped assessment due to failure on the part of the assessee to disclose truly and fully all the material facts. The Income-tax Officer has stated in the recorded reasons which he placed before the Commissioner for necessary sanction that the confessional statements are to the effect that the loans to the assessee are bogus and this fact clearly indicated, in our view, that the Income-tax Officer has applied his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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