LexSRI KRISHNA PVT. LTD. ETC. versus ITO CALCUTTA AND ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
SRI KRISHNA PVT. LTD. ETC.
A
v.
ITO CALCUTTA AND ORS.
JULY 16, 1996
[B.P. JEEVANREDDY AND S.B. MAJMUDAR, JJ.]
B
Income Tax Act, 1961-Sections 147 and 148--Reopening of assess-
ment-Scope of enqui1)~Duty of assessee to fully and uuely disclose all
mate-rial facts-Non disc/osure--Creation of bogus entries of
/oan.1~Reasonable b""uunds fur Income Tax Officer to issue notice u/s 148.
C
In the return filed for the Assessment Year 1959-60, the assessee
sho\ved certain hundi loans said to have been taken from a number of
persons. The Assessment was made accepting the assessee's case. During
. the assessment proceedings for the succeeding year, 1960·61, the assessee
again showed hundi loans of more than rupees seventeen lakhs. The D
Income Tax Ollicer held that out of the hundi loans claimed, loans
totalling Rs. 11,15,275 were not established to be genuine loans. He also
found that many of them were bogus claims while some of the alleged
lenders w·ere found to be near relations of directors or principal
shareholders of the assessee. That amount was added as income from E
undisclosed sources. Having regard to the similarity of the claims and the
persons who were said to have advanced the said unsecured hundi loans
during the Assessment Year 1959-60, the ITO issued a notice u/s 148
calling upon the assessee to file a revised return for the Assessment year
1959-60. The assessee filed a Writ petition in the High Court questioning
F
the validity of the notice on the ground that the Income Tax Ollicer had
no reasonable ground to believe that income chargeable to tax had escaped
ass_essment for that year on account of any omission or failure on his part
to make a full and true disclosure of all material facts. The petition was
allowed by a Single Judge of the High Court whose decision had been
reversed in appeal by the Division Bench. This appeal by special leav.e had G
been filed by the assessee against the judgment and order of the Division
Bench of the High Court.
Dismissing the appeal, this Court
HELD : 1.1. The power conferred upon the Income tax Officer by H
627
628
SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.
A Sections 147 and 148 of the Income Tax Act is not an urbridled one. It is
hedged in with several safeguards conceived in the interest of eliminating
room for abuse of this power by the assessing officers. The idea was to
save the assessees from harassment resulting form mechanical re-opening
of assessment but this protection is available only to those assessees who
B disclose all material facts truely and fully. (633-D-E]
1.2. In the reasons recorded by the Income Tax Officer {as required
by Section 148(2), he had stated clearly that in the course of assessment
proceedings for the succeeding assessment year, it was found that out of
the unsecured hundi loans put forward by the assessee, a large number
C were found to be bogus and that many of the so-called lenders were found
to be near relations of the directors or the principal shareholders and that
similar loans were also noticed for the Assessment year 1959-60 and
therefore, he had reason to believe that there had been no true and full
disclosure of all material facts by the assessee for the Assessment Year
D 1959-60 leading to escapement of income. It was not alleged by the asses see
that the Income Tax Officer had not checked up or tallied the names of
the alleged lenders for both the assessment years and that he merely went
by the fact that there were unsecured handi loans for both the assessment
years. In the absence of any such allegation • which allegation, if made,
could have afforded an opportunity to the Income Tax Officer to answer
E the said averment • it must be presumed that the Income Tax Officer did
find that a large number of alleged lenders who were found to be bogus
during the Assessment Year 1960-61 were also put forward as lenders
during the Assessment year 1959-60 as well. Evidently, this was what he
meant in the context, when he spoke of "similar loans" being noticed for
F
the year in question as well. In such a situation, it was impossible to say
that the Income Tax Officer h;id no reasonable ground to believe that there
had been no full and true discl0sure of all material facts by the assessee
during the relevant assessment year and that on that account, income
chargeable to tax had escaped assessment. Every disclosure is not and
cannot be treated to be a true and full diExcerpt shown. Read the full judgment & AI analysis in Lexace.