The assessee discharged the obligation which lay upon it by disclosing its books of account and evidence from which material facts companyld be discovered and it was for the Income Tax Officer to decide whether the documents produced by the assessee were genuine or false.
The Income Tax Officer thereupon issued a Notice under Section 34 1 a of the Income Tax Act to re open the assessment of the assessee for the assessment year 1949 50 in order to bring to tax the further amount of Rs.
The Income Tax Officer in the affidavit in reply filed by him on 5th December, 1968 declined to disclose the facts which had weighed with him in reaching the belief that the income of the respondent had escaped assessment by reason of its failure to disclose fully and truly all material facts, on the ground that if such facts were disclosed to the respondent, it would cause great prejudice to the interests of the Revenue and would frustrate the object of re opening the assessment.
The present case is clearly companyered by the decision of this Court in Commissioner of Income Tax, Calcutta v. Burlop Dealers Ltd. There the assessee in the companyrse of its original assessment to income tax for the assessment year 1949 50 had produced a partnership agreement with one Ratiram Tansukhrai and claimed that the profits earned by it from H. Manory Ltd. had been divided between itself and Ratiram Tansukhrai under the partnership agreement and its one half share of the profit, namely, Rs.
My reasons for issuing such numberice were these.
This was obviously an untenable stand because the existence of reason to believe on the part of the Income Tax Officer was a justiceable issue and it was for the companyrt to be satisfied whether in fact the Income Tax Officer had reason to believe that income had escaped assessment by reason of failure of the respondent to make a full and true disclosure.
The Income Tax Officer claimed that the transactions of loan represented by the hundis were bogus and numberinterest was paid by the respondent to any of the creditors shown in the hundis and it was wrongly allowed as a deduction and hence a part of the income of the respondent had escaped assessment by reason of the failure of the respondent to disclose fully and truly all material facts necessary for its assessment.
In the premises, it appeared to me that the petitioner had failed to disclose fully and truly all material facts necessary for its assessment, and a portion of the petitioners income had escaped assessment by reason of such failure.
From the Judgment and Order dated 11 4 74 of the Calcutta High Court in Appeal from original Order dated 221/70.
Credits against the names of certain persons as having advanced loans viz.
87,937/ was the only amount assessable to tax in respect of this source.
The respondent challenged the validity of the Notice issued by the Income Tax Officer by filing a writ petition in the Calcutta High Court.
Amarlal Moolchand, Girdharidas, Reghoomal, Murlidhar, Kanhaiyalal and Deudaram Basdeo in the petitioners books were found number to be genuine.
It appears that while making assessment for the assessment year 1950 51 the Income Tax Officer found that the partnership agreement between the assessee and Ratiram Tansukhrai was a got up device to reduce the profit received from H. Manory Ltd. and the assessee was, therefore, liable to tax on the entire amount of profit companying from H. Manory Ltd. This view taken by the Income Tax Officer was companyfirmed on appeal by the Appellate Assistant Commissioner and the Income Tax Tribunal.
The respondent preferred an appeal and a Division Bench of the High Court disagreeing with the view taken by the Single Judge held that there was numberfailure on the part of the respondent to disclose fully and truly all material facts and in any event there was numbermaterial on the basis of which it companyld be said that the Income Tax Officer had reason to believe that any part of the income had escaped assessment by reason of such failure on the part of the respondent.
The Income Tax Officer realising this position filed a further affidavit on 27th January, 1970 stating as follows In January 1968 I was the Income Tax Officer I Ward, Hundi Circle, Calcutta.
The Income Tax Officer accepted the partnership agreement and assessed the assessee only on the profit of Rs.
87,937/ .
The Division Bench accordingly allowed the writ petition and quashed and set aside the Notice for re opening the assessment.
The Revenue applied to the Tribunal for a reference but the application was rejected and the High Court also dismissed the application of the Revenue for calling for a reference from the Tribunal.
In the companyrse of assessment of the petitioner for assessment year 1963 64 it was discovered that various items shown as loans against the security of hundis in the petitioners books of account for the previous year relevant to assessment year 1959 60 were in fact fictitious.
The respondent companyld number be said to have failed to make a true and full disclosure of the material facts by number companyfessing before the Income Tax Officer that the hundis and the entries in the books of account produced by it were bogus.
The assessment of the respondent was companypleted on 23rd August, 1960.
On or about the 25th January 1968 I issued a numberice under Section 148 of the Income Tax Act, 1961 on the petitioner.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The respondent companytended that there was numberfailure on its part to disclose fully and truly all material facts necessary for its assessment and that in any event the Income Tax Officer had numberreason to believe that any part of the income of the respondent had escaped assessment by reason of such failure on the part of the respondent.
The Income Tax Officer thereupon preferred the present appeal to this Court after obtaining a certificate from the High Court.
The writ petition was heard by a Single Judge of the High Court and he took the view that the affidavit of the Income Tax Officer dated 27th January, 1970 clearly showed that he had reason to believe that income of the respondent had escaped assessment by reason of its failure to disclose fully and truly all material facts and he accordingly dismissed the writ petition.
The Appellate Assistant Commisioner companyfirmed the order of the Income Tax Officer on appeal, but on further appeal, the Tribunal accepted the companytention of the assessee and held that there was numberfailure on the part of the assessee to make a full and true disclosure of the material facts and hence the Income Tax Officer was number justified in seeking to re open the assessment under Section 34 1 a of the Income Tax Act.
829 of 1975.
The Judgment of the Court was delivered by BHAGWATI, J. This appeal by certificate is directed against an order passed by a Division Bench of the High Court of Calcutta allowing an appeal against a decision of a Single Judge dismissing the writ petition of the respondent.
It appeared during assessment proceedings for 1963 64 that numbere of such loans were genuine.
On or about 25th January, 1968, however, a Notice was issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961 to re open the assessment of the respondent for the assessment year 1959 The Notice was obviously under Section 147 a since a period of four years had already elapsed from the close of the assessment year 1959 60 and numberNotice companyld be issued under Section 147 b .
87,937/ to the income returned by the assessee.
C. Manchanda, and Miss A. Subhashini for the Appellant S. Desai, Sanjay Bhattacharya and Rathin Dass for the Respondent.
The facts giving rise to the appeal may be briefly stated as follows The respondent was assessed to income tax for the assessment year 1959 60 and certain interest paid by the respondent to creditors from whom it claimed to have borrowed monies on hundis, was allowed as deductible expenditure.
The Revenue thereupon preferred an appeal to this Court by special leave.
The High Court also on a reference agreed with the view of the Tribunal.
Here also the respondent produced all the hundis on the strength of which it had obtained loans from creditors as also entries in the books of account showing payment of interest and it was for the Income Tax Officer to investigate and determine whether these documents were genuine or number.
This companytention was negatived by the Income Tax Officer and the income of the assessee was re assessed by adding Rs.
