2000-VIL-570-DEL-DT

Equivalent Citation: [2001] 250 ITR 365, 169 CTR 548, 117 TAXMANN 729

DELHI HIGH COURT

Date: 18.12.2000

HANUMAN TRADING CO.

Vs

COMMISSIONER OF INCOME TAX

BENCH

Judge(s)  : ARIJIT PASAYAT., D. K. JAIN 

JUDGMENT

The judgment of the court was delivered by

ARIJIT PASAYAT C.J.--Pursuant to the directions given by this court in I.T.C. No. 68 of 1978, by order dated March 31, 1980, the following question has been referred by the Income-tax Appellate Tribunal, Delhi Bench "C" (for short the "Tribunal"), for the opinion of this court:

"Whether, on the facts and in the circumstances of the case, the initiation of the proceedings for reassessment under section 147(a) of the Income-tax Act, 1961, with regard to the cash credit in the name of Afghan Fruit Company for the assessment year 1962-63 is valid in law?"

The background facts as indicated in the statement of case are as follows:

For the assessment years 1962-63 to 1966-67 assessments were completed originally under section 143(3) of the Income-tax Act, 1961 (for short the "Act"), on several dates. At that point of time, the assessee had filed a trial balance-sheet. The said trial balance-sheet showed a cash credit in the names of Lekh Raj Manak Chand and Afghan Fruit Company. The Income-tax Officer issued a query dated December 14, 1962, which contained names of these two parties. The assessee submitted a certificate from Afghan Fruit Company. Subsequent to the assessment, the Income-tax Officer came to know that the two parties, i.e., Lekh Raj Manak Chand and Afghan Fruit Company, were bogus name lenders and, therefore, initiated proceedings under section 147(a) of the Act, after obtaining an approval as required under the said provision. The reasons for entertaining the belief were recorded in the proposal for reopening as follows:

"Original assessment in this case was made on February 4, 1963, on an income of Rs. 45,349. While making assessment, the then Income-tax Officer noticed certain cash credits amounting to Rs. 35,000 appearing in the books of the firm in the name of Lekh Raj Manak Chand and Afghan Fruit Company. The assessee at the time of assessment filed confirmatory letters from the respective parties but later on it was noticed by the Department that both the confirmatory letters which purported to be genuine are from parties who have been declared bogus parties after examination. These credits are not therefore genuine. I have therefore reasons to believe that by reasons of omission to disclose fully and truly all material facts necessary for his assessment, the income chargeable to tax has escaped assessment. Sanction of the Commissioner of Income-tax is, therefore, solicited for initiating action under section 147(a)."

A notice under section 148 was issued. The assessee challenged the initiation of proceedings on the ground that it had furnished all the primary facts necessary and, therefore, initiation of proceedings was bad. The Income-tax Officer did not accept the plea and made some additions. The assessee preferred an appeal before the Appellate Assistant Commissioner (in short the "AAC"). The assessee's stand that it had disclosed all primary material facts at the time of original assessment found acceptance by the Appellate Assistant Commissioner. Therefore, the assessment was cancelled. The Department preferred an appeal before the Tribunal. The main challenge related to the legality of proceedings under section 147(a) of the Act. After considering the rival stands, the Tribunal, inter alia, came to the following conclusion:

"What we find in the instant case is that the reasons to believe were specific and definite in their import. Therefore, keeping in view the observations of the Lordships of the Supreme Court in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, we find that there is a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief. Another issue which can be adverted to at this stage is whether the assessee disclosed all the primary facts as understood by the ratio of the decision of the Lordships of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191. We find that the assessee in the instant case did not disclose all its primary facts. The primary facts as understood keeping in view the ratio of the Lordships of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 are those facts which are correct facts and they cannot be equated to or equated with false facts, which proved to be wrong later on. We, therefore, hold that the assessee did not place all the material primary facts in respect of the cash credits in the name of Afghan Fruit Company, therefore, we are of the considered view that the initiation of the proceedings under section 147(a) by the Income-tax Officer was in accordance with law. We, therefore, reverse the order of the Appellate Assistant Commissioner on this issue and restore that of the Income-tax Officer for all the five years."

Accordingly, the assessment as originally made was upheld and the Appellate Assistant Commissioner's conclusions were set aside. The prayer for reference under section 256(1) of the Act was turned down and as noted above pursuant to the directions given by this court, the question, as aforesaid, has been referred.

We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessee in spite of notice. Learned counsel for the Revenue submits that the conclusions of the Tribunal are essentially factual, giving rise to no question of law. We have considered the submissions in the background of conclusions arrived at by the Tribunal. We find substance in the plea of learned counsel for the Revenue that the conclusions are factual and do not give rise to any question of law. Our answer to the A question, therefore, is in the affirmative, in favour of the Revenue and against the assessee.

 

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