PHOOL CHAND BAJRANG LAL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) This appeal, on a certificate of fitness granted by the High Court under Art. 133 of the Constitution of India is directed against the judgment in Civil Misc. Writ Petition No. 1541 of 1974 decided by the Allahabad High Court on 24-11-1976 : (reported in 1977 Cur Tax Rep 73) and arises in the following circumstances :

(2.) After receipt of the above communication, the assessing authority on 26-8-1971 issued a notice to the assessee stating therein that he was prima facie satisfied that the loan transaction of Rs. 50,000/- was not 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 S. 147 (a) of the Indian Income-tax Act, 1961 (hereinafter called as the Act). Objections were invited from the assessee. In his reply dated 25-11-1972, the assessee contended that there had been no non-disclosure on its part in respect of the loan transaction of Rs. 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. After considering the reply, the ITO issued a notice under S. 148 of the Act to the assessee proposing to reassess his income, after recording that he had reason to believe that the assessee's income in respect of which he was assessable to tax had escaped assessment within the meaning of S. 147 of the Act. 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 notice. 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. On 26-6-72, the assessee filed its return for the assessment year 1963-64 and later appeared before the ITO in person on 26-9-1973. The assessee filed before the ITO, Azamgarh an affidavit from the creditor, Calcutta company, in support of its contention that the cash loan had in fact been raised from the creditor. The ITO directed the assessee to produce the Calcutta creditor for cross-examination in respect of his affidavit. The creditor, Shri Surana, Managing Director of the Calcutta Company appeared and was cross examined by the ITO. During the course of his cross examination, he admitted before the ITO that he had made a confession 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. The creditor, was thereafter reexamined by the counsel for the assessee but nothing was elicited from the creditor regarding the correctness or otherwise of the 'confession' alleged to have been made by him before the ITO at Calcutta, during the assessment proceedings relating to his company at Calcutta. After considering the entire material on the record, a show cause notice was issued by the ITO, Azamgarh to the assessee detailing all the facts gathered by him from the contents of the letter of the ITO at Calcutta, the confession 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. The assessee was called upon to reply but he did not give any reply to the show cause notice. While the matters rested here, the assessee filed Writ Petition No. 1541/74 in the High Court of Judicature at Allahabad on 18-3-74 seeking the quashing of the notices issued under S. 148 of the Act and to restrain the ITO from continuing with the reassessment proceedings.

(3.) A Division Bench of the High Court after a detailed consideration of facts and law, came to the conclusion that the information furnished by the ITO, Calcutta could form the basis for entertaining a resonable 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 company, his income had escaped assessment during the relevant assessment year and it dismissed the writ petition with costs on 24-11-1976. The assessee applied for a certificate of fitness to file an appeal in the Supreme Court under Art. 133 of the Constitution. The Division Bench of the High Court while granting the certificate opined: