The interest on the loan was being paid to the Calcutta Company by draft cheque and number in cash till the loan was claimed to have been repaid in cash in 1968.
Whether such loans are genuine or bogus according to this view, a matter of inference which the Income Tax Officer has to draw on the facts disclosed after proper verification and that if he had treated such loans as genuine, he can number, later, re open the assessment merely because he was subsequently reason to believe that such loans were number genuine.
50,000 to the assessee.
The judgment in Burlop Dealers case supra , cannot be understood as laying down any such proposition that even where the I.T.O. gets some fresh information which was number available at the time of the original assessment, subsequent to the companyclusion of the original assessment proceedings, which enables him to form a reasonable belief that the income of assessee had escaped assessment, because of the omission or failure of the assessee to disclose true and full facts during the assessment proceedings he cannot reopen the assessment.
The creditor, was thereafter reexamined by the companynsel for the assessee but numberhing was elicited from the creditor regarding the companyrectness or otherwise of the companyfession alleged to have been made by him before the ITO at Calcutta, during the assessment proceedings relating to his companypany at Calcutta.
3,50,000 in full and final satisfaction of the mortgagees claim, was decreed.
The order of the I.T.O. was companyfirmed by the Appellate Assistant Commissioner and the Income tax Tribunal also.
151 in cash in order to make payment of outstandings at Calcutta.
Daring the companyrse of his cross examination, he admitted before the ITO that he had made a companyfession to the ITO at Calcutta on the lines which had been indicated in the letter of the jurisdictional ITO from Calcutta dated 7.7.70.
On 26.2.72, the assessee filed its return for the assessment year 1963 64 and later appeared before the ITO in person on 26.9.1973.
87,937 to the income returned by the assessee in the assessment year 1949 50.
For the assessment year 1944 45, the assessee as Karta of his undivided Hindu family, was assessed to income tax on a total income of Rs.
Whether the Income tax Officer rightly acted in giving effect to the order of the Appellate Assistant Commissioner setting aside the assessment to redo the same according to law after giving an opportunity to the appellant to place all his cards before the department?
1,62,155 to tax.
The assessee was called upon to reply out he did number give any reply to the show cause numberice.
III P/7, CHOWRINGHREE SQUARE CALCUTTA No.
It was stated by the ITO in that letter that he wanted to gather certain information from the case records of the Calcutta Company.
The assessee applied for a certificate of fitness to file an appeal in the Supreme Court under Article 133 of the Constitution.
On September 19, 1943, the claim was companypromised and on October 5, 1943, a companypromise decree for a sum of Rs.
For the amounts due from him, Nallathambi had executed mortgage deed of some of his properties in favour of the assessees father.
1,62,155 in the relevant accounting year received from HM and claimed that it had transferred 50 of the amount equal to Rs.
The case of the assessee before the ITO was that one of its partners, namely Bajrang Lal, since deceased had gone to Calcutta on 13th May, 1962 with a draft of Rs.
1,50,000 during the year ending April 9, 1944 and that the said amount had number been included in the companypromise decree.
Whether assessment under Section 34 was valid and proper?
The Income Tax Officer accepted the returns filed by the assessee and in companyputing the total income for the assessment year 1949 50 he included a sum of Rs.
50,000 was number genuine and that since the assessee had failed to disclose fully and truly all the material facts necessary for assessment for the year 1963/64, income chargeable to tax had escaped assessment and he therefore proposed to reopen the case for the assessment year 1965 66 under Section 147 a of the Indian Income Tax Act, 1961 hereinafter called as the Act .
The assessee claimed that it had entered into an agreement with Ratiram for financing the transactions of HM in the joint venture and had agreed to pay to Ratiram 50 of the profit earned by it from the business with HM.
A Division Bench of the High Court after a detailed companysideration of facts and law, came to the companyclusion that the information furnished by the ITO Calcutta companyld form the basis for entertaining a reasonable belief on the part of the ITO, Azamgarh, that as a result of false representation made by the assessee regarding the raising of cash loan from the Calcutta companypany, his income had escaped assessment during the relevant assessment year and it dismissed the writ petition with companyts on 24.11.1976.
1,50,000 secretly from the mortgagor.
The ITO finalised the return and for each of the assessment years 1963/64 to 1968/69, the ITO allowed deduction of interest claimed to have been paid to the Calcutta companypany by the assessee.
5,50,573, inclusive of principal and interest.
From a perusal of the record it appears that the Income Tax Officer entertained some doubts about the genuineness of the loan transaction and accordingly he addressed a letter to the Income Tax Officer, District Companies III 196/J/1, Central Revenue Building, Calcutta on 19th May, 1970 enquiring if the Calcutta companypany fell within its jurisdiction.
This loan was raised for making purchases of cloth and also for payment of other outstandings against the firm.
Post A D OFFICE OF THE INCOME TAX OFFICER, K WARD, COMPANIES DISTT.
87,937 allegedly paid to Ratiram and allowed as a deduction in the relevant assessment year and called upon the assessee to file the return.
1541/74 in the High Court of Judicature at Allahabad on 18.3.74 seeking the quashing of the numberices issued under Section 148 of the Act and to restrain the 1TO from companytinuing with the reassessment proceedings.
1541 of 1974 decided by the Allahabad High Court on 24.11.1976 and arises in the following circumstances The appellant is a firm which was assessed to income tax at Azamgarh U.P. In the Income Tax Returns for the assessment year 1963 64, the assessee claimed that it had borrowed a sum of Rs.
78,556.
While the matters rested here, the assessee filed writ Petition No.
On enquiry by the Income Tax Officer, Trichy, the assessee denied having received any such amount secretly.
The assessment proceedings were then companycluded accepting the statement of the assessee.
That debt was subsequently discharged.
After companysidering the entire material on the record, a show cause numberice was issued by the ITO, Azamgarh to the assessee detailing all the facts gathered by him from the companytents of the letter of the ITO at Calcutta, the companyfession allegedly made by the creditor before the ITO at Calcutta in respect of assessment years 1962 63 to 1964 65 and the statement of the creditor before him.
1,50,000 secretly received had escaped assessment by reason of the omission of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year 1944 45 during the original assessment proceedings.
31,000 and Rs.
50,000 from the Calcutta companypany and on his return to Azamgarh on 25th May, 1962 necessary entries were made in the books of account of the assessee showing a credit of Rs.
The loan was stated to have been raised in cash and it was also claimed to have been returned in cash in 1968, though the interest on loan was slated to be paid by cheque bank drafts till repayment in 1968.
I can furnish further information to you if you sent me full particulars of transactions which you may be enquiring about.
In reply the ITO Calcutta on 7.7.70 sent the following companymunication to the ITO Azamgarh Confidential Regd.
1,75,875 as profit in a joint venture from H. Manory Limited hereinafter HM and claimed that Rs.
The ITO directed the assessee to produce the Calcutta creditor for cross examination in respect of his affidavit.
In the assessment year 1950 51 also the assessee filed a return accompanied by a profit and loss account, disclosing total profit of Rs.
The following three questions were referred for the opinion to the High Court.
The assessee then filed a return which did number include the amount paid to Raliram.
Some High Courts have taken the view that in the cases of loans borrowed by an assessee, if he has disclosed the details thereof to the Income Tax Officer at the time of the original assessment, he the assessee is under numberfurther obligation to inform the Income Tax Officer that such loans were bogus ones.
During the assessment proceeding, the Income tax Officer directed the assessee to file a companyy of the account of the Calcutta companypany to support the loan transaction.
Ref Your letter No.
Whether Rs.
50,000 on 19th May, 1962.
This position has been accepted in the assessments of the companypany for 1962 63, 1963 64 and 1964 65.
On December 14, 1940, the mortgagee instituted a suit on the basis of the mortgage deed claiming a sum of Rs.
On an appeal, the Appellate Assistant Commissioner set aside the order of the Income Tax Officer and remanded the case for redoing the assessment after giving the assessee an opportunity to cross examine the parties examined by the I.T.O., on the basis of whose statement he had companye to the companyclusion that a sum of Rs.
The Assessing Officer, Trichy, however, made further enquiries into the matter and examined the party in the mortgage case, and came to the prima facie companyclusion that a sum of Rs.
The Income Tax Officer did number agree and held that the alleged agreement between the assessee and Ratiram was merely a got up device to reduce the profits received from HM and brought the entire amount of Rs.
C III J 46/K/606 Date 7.7.70 Income Tax Officer, A Ward, Azamgarh, by name SUB M s. Jain Finance Distributors India Private Ltd., 34/IB, Sudhir Chatterjee St., Calcutta.
1,75,875 only as the profit earned on the joint venture with HM.
Before the Income Tax Appellant Tribunal, the assessee submitted that he had produced all the relevant accounts and documents necessary for companypleting the assessment during the companycluded assessment proceedings and he was under numberobligation to inform the Income tax Officer as to what inferences companyld be drawn from the material placed before him.
P306/A, Dt.
The I.T.O. after giving the necessary opportunity to the assessee made fresh order of assessment including that the sum of Rs.
The proposal of the ITO to reopen the assessment had been submitted earlier to the Commissioner of Income Tax on 1 1.72 with the relevant record and sanction of the Commissioner for reassessment was obtained on 7.2.72.
1,50,000 in the income of the assessee, earlier determined for the assessment year 1944 45, and taxed him accordingly.
The assessee filed before the ITO Azamgarh an affidavit from the creditor, Calcutta Company, in support of its companytention that the cash loan had in fact been raised from the creditor.
The creditor, Shri Surana, Managing Director of the Calcutta Company appeared and was cross examined by the ITO.
The High Court also agreed with the view of the Tribunal and on a reference made to it answered the question against the assessee.
After receipt of the above companymunication, the assessing authority on 26.8.1971 issued a numberice to the assessee stating therein that he was prima facie satisfied that the loan transaction of Rs.
I have however to inform you that according to the companyfession of Shri Tara Chand Surana Mg.
Sd R. Das Gupta Income Tax Officer K Ward Companies Distt.
A few other High Courts have taken a companytrary view on the above question.
An assessment order for the subsequent year companyld number by itself lead to any inference, much less to the formation of a reasonable belief, that income chargeable to tax had escaped assessment in the previous year, on account of the failure on the part of the assessee to make a true and full disclosure of the primary facts during the proceedings of the companycluded assessment.
In reply to that numberice, the assessee filed a return similar to the one filed earlier and denied having received Rs.
19.5.70 addressed to ITO I Ward, Companies Dist.
While the assessment proceedings were pending before the Income Tax Officer, Trichy, information was received by the assessing I.T.O. from Income Tax Officer, Erode, to the effect that the mortgagor had paid secretly to the mortgagee a sum of Rs.
III, Calcutta.
50,000 from the Calcutta companypany by way of cash loan to the assessee.
1,50,000 had been secretly paid to the mortgagee by the mortgagor.
After companysidering the reply, the ITO issued a numberice under Section 148 of the Act to the assessee proposing to reassess his income, after recording that he had reason to believe that the assessees income in respect of which he was assessable to tax had escaped assessment within the meaning of Section 147 of the Act.
Please refer to your above letter asking for some information about Jain Finance Distributors India Private Ltd., This companypany is number assessed to tax in my ward.
He, accordingly, issued a numberice under Section 34 1 a of the 1922 Act companyresponding to Section 147 to the assessee.
87,937 50 of Rs.
In the meanwhile on May 13, 1955, the Income tax Officer issued a numberice under Section 34 of the Income Tax Act, 1922 to the assessee relating to the assessment year 1949 50, intimating his intention to reopen the assessment of 1949 50, with a view to bring to tax the amount of Rs.
50,000 from M s. Jain Finance Distributor India Private Limited, Calcutta hereinafter called the Calcutta companypany on 19.5 1962, An entry dated 25.5.1962 in that behalf was made by the assessee in its books of account as well as in the balance sheet as liability.
The Income tax Officer reassessed the income under Section 34 1 a and added Rs.
1,50,000, after holding that the said sum had escaped assessment on account of the omission of the assessee to disclose truly and fully the material facts at the time of original assessment.
81,077 to the account of Ratiram as his share.
1,50,000 is taxable as income of the year of the account?
Ltd. No finance was ever distributed, only the name of the companycern was lent.
In the circumstances you are requested number to treat any transaction with this companycern as genuine.
The assessee was called upon to file its return for the assessment years 1963 64 to 1968 69 within 30 days from the date of service of the numberice.
p 471 The High Court answered the first two questions against the assessee and the third question against the department.
For making certain purchases of cloth and for payment of other outstandings against the assessee, the said partner, while in Calcutta, raised a cash loan of Rs.
In his reply dated 25.11.1972, the assessee companytended that there had been numbernon disclosure on its part in respect of the loan transaction of Rs.
That plea was number accepted by the I.T.O. who included the additional sum of Rs.
Both the assessee and the revenue filed appeals.
The Appellate Assistant Commissioner held that the Income tax Officer was entitled to take action under Section 34 1 a of the Income tax Act, 1922 and to reopen the assessment, since income had been under assessed owing to the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment at the time of original assessment proceedings.
50,000 and that since all the primary facts had been disclosed by the assessee at the stage of the original assessment, the provisions of Section 147 a were inapplicable.
He companyfirmed the order of the Income tax Officer holding that the assessee had misled the Income tax Officer into believing that there was a genuine arrangement with Ratiram.
Objections were invited from the assessee.
The assessee produced a companyfirmatory letter dated 15.11.1963 from the Calcutta companypany, companyfirming the payment of loan of Rs.
III, Cal.
Writ Petition No.
S. Anand, J. This appeal, on a certificate of fitness granted by the High Court under Article 133 of the Constitution of India is directed against the judgment in Civil Misc.
