PHOOL CHAND BAJRANG LAL AND ANR. versus INCOME TAX OFFICER AND ANR.

Citation: [1993] SUPP. 1 S.C.R. 28 · Decided: 13-07-1993 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Dismissed

Judgment (excerpt)

A 
PHOOL CHAND BAJRANG LAL AND ANR. 
'· 
v. 
INCOME TAX OFFICER AND ANR. 
JULY 13, 1993 
B 
[S.C. AGRAWAL AND DR. A.S. ANAND, JJ.] 
Income Tax Act, 1961-Ss. 147, 148 149-Income escaping· assess-
ment-Assessing Officer's jurisdiction to reopen assessment-Held, Income 
Tax Officer can reopen assessment only if on the basis of specific, reliable 
c and relevant information coming to his possession subsequently he has 
reasons to beliel'e that by reason of omission or failure on the part of the 
assessee to make a tnte and full disclosure of all material facts any part of 
his income profit or gains chargeable to income tax has escaped assess-
ment-To say that the question regarding truthfulness or falsehood of'certain 
D 
transaction reflected in retunz can only be examined during original assessnlent 
proceedings and not at any stage subsequent thereto, does violence to plane 
phraseology of ss. 147(a), and 148 and is against the settled law. 
The appellant firm was an income tax assessee at Azamgarb(U.P.). 
In the income tax returns for the assessment year 1963-64, it claimed to 
E 
have borrowed in cash a sum of Rs. 50,000/- on 19.5.1962 from a Calcutta 
Company and filed a letter from that company confirming the payment of 
the loan to the assessee. The assessee claimed that it bad paid interest to 
the Calcutta Company and was accordingly allowed deduction for each of 
the assessment years 1963-64 to 1968-69. 
F 
The Income Tax Officer Azamgarh entertained some doubts abont 
the genuineness of the loan transaction and requested the Income Tax 
Officer at Calcutta to supply him information about the Calcutta Com-
pany. The Income Tax officer Calcutta replied that the business of the 
Calcutta Company consisted entirely of name lending and no finance was 
.. 
G claimed to have been distributed in the assessments of the company for 
1962-63 to 1964-65. 
The assessing authority issued a notice to the assessee on 26.8.1971 
proposing to reopen the case for the assessment year 1965-66 under 
Section 147(a) of the Income Tax Act, 1961, as it was prima facie satisfied 
H that the Joan transaction of Rs.50,000 was not genuine and since the 
28 
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PHOOLCHAND v. l.T.0. 
29 
assessee had failed to disclose fully and truly all material facts necessary A 
for assessment years 1963-64, income chargeable to tax had escaped as-
sessment. The assessee unsuccessfully contended that it had disclosed all 
the primary facts at the stage of original assessment and the provisions of 
Section 147(a) were inapplicable. The I.T.O. issued a notice under Section 
148 of the Act to reassess assessee's income after recording that he had 
reasons to believe that the assessee's income had escaped assessment 
within the meaning of Section 147. The assessee filed the return for 
assessment year 1963-64 as also an affidavit of the creditor Calcntta 
Company in support of its stand of cash loan. The Managing Director of 
B 
the Calcutta Company was examined and he admitted to have made a 
confession to Calcutta I.T.O. in respect of his company's business to be of C 
mere name lending. The l.T.O. issued a show cause notice to the assessee. 
The assessee meanwhile filed a writ petition before the High Court seeking 
to quash the notice issued under Section 148 to it and to restrain the I.T.O. 
from continuing with the assessment procetdings. 
The High Court dismissed the writ petition holding that the infor-
D 
mation received from Calcutta I.T.O. could form the basis for entertaining 
a reasonable belief on the part of the assessing authority that as a result 
of false representation made by the assessee regarding the cash loan from 
the. Calcutta Company, its income had escaped assessment during the 
relevant assessment year. However, noting the divergent views of different E 
High Courts in similar cases, the High Court granted the certificate of 
fitness to appeal to this Court under Article 133 of the Constitution. The 
assessee accordingly filed the appeal before this Court. 
It was contended by the assessee that the obligation of an assessee F 
during the assessment proceedings is primarily to disclose all material 
and relevani facts i.e. the primary facts and once that disclosure has been 
made, it is for the Income Tax Officer to draw the necessary inferences 
therefrom on the basis of such facts; that if an Income Tax Officer draws 
some inferences at the time of the assessment proceedings from the 
disclosed primary facts and accepting 

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