TMI Blog1988 (7) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Statement of raw material consumption for the year ended 31-12-1971. (ii) Statement of closing stock of raw material as on 31-12-1971. (iii) Account of M/s. Bharat Pharma Distributors, Bombay, in the books of the assessee for year 1-1-71 to 31-12-71. (iv) Cheque Nos., date and address of Bankers on which cheques were issued to M/s. Bharat Pharma Distributors, for payment of their bills. (v) Confirmation of the account of M/s. Bharat Pharma Distributors, Bombay, in the books of the assessee for the year 1971 by Sri R.K. Thakkar, Prop. of M/s. Bharat Pharma Distributors. (vi) Details of quantity and description of material supplied by M/s. Bharat Pharma Distributors together with the details of payment made therefor. (vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961. He recorded the following reasons for the re-opening for 1972-73 on 5-2-1977. " Received I.A.C.C.R.V's letter dt. 25-1-77, along with enclosures. From this, it is clear that the assessee has concealed profits by showing bogus purchases to the extent of Rs. 1,86,813. I, therefore, reopen assessment u/s. 147(a) of the Act. Issue notice u/s. 148 accordingly." Exactly similar reasons were recorded on 5-2-1977 for the assessment year 1973-74 also, the only difference being that the figure of bogus purchases in this year was recorded as Rs. 10,39,604. The enclosures with that letter of the I.A.C. were probably the statement of Sri R.K. Thakkar recorded by the I.T.O. Sec. XXX (Central), Bombay, on 23-7-1976 and statements A an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive argued that there was omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessments. Thus, according to the learned representative, the I.T.O. had no jurisdiction to reopen the assessments u/s. 147(a) and the subsequent statement of Sri R.K. Thakkar can at the best be taken as information in possession of the I.T.O. to enable him to reopen the assessments u/s. 147(b). 6. Learned Departmental Representative, on the other hand, supported the order of the CIT(A). According to him, the subsequent statement of Sri. R.K.Thakkar had sufficient material to furnish reason to believe that the assessee omitted or failed to disclose fully and truly all material facts necessary for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-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 ITO. 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. " "... As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the material produced by the assessee. The ITO did draw inference therefrom. From the retracted statement of Sri R.K.Thakkar it cannot be prima facie said that there was contrivance between the assessee and Sri R.K.Thakkar at the time of making statement on oath on 4-12-1974 during the course of assessment proceedings of the assessee. The pertinent question is as to whether any belief can be formed on the basis of retracted version of a third party that the assessee omitted or failed to disclose fully and truly all material facts. Normally a person making contradictory statements on oath is not worthy of credit and therefore the subsequent version cannot be founded upon to believe that there was omission or failure on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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