INCOME TAX OFFICER Vs. DWARKA DASS AND BROS

JUDGEMENT

(1.) THIS is an appeal under cl. 10 of the Letters Patent as applicable to this Court from the judgment and order dated 19th May, 1978 in C.W. No. 882/73. By the above order a learned single Judge of this Court (the present Chief justice) quashed a notice issued by the ITO, the first appellant, under s. 148 r/w S. 147 of the IT Act, 1961, dated 28th March, 1970, and a second notice under S. 142 of the Act dated 12th April, 1973, and also restrained the present appellants from taking any proceedings against the present respondent in pursuance of the notices quashed. The learned Judge held that the conditions precedent for the issue of the notice under S. 148 of the IT Act, 1961, had not been fulfilled. It was common ground that the provisions of S. 147(b) were not applicable to the case in view of the lapse of time and the only question before the learned Judge was whether the conditions precedent as set out in cl. (a) of S. 147 had been fulfilled. This question was answered in the negative.

(2.) THE judgment under appeal has been reported in Dwarka Dass and Bros. vs. ITO (1979) 10CTR (All) 268 ; (1979) 118 ITR 958 (Delhi). It sets out the facts and circumstances of the case elaborately and the facts, therefore, need not be repeated. The learned Judge found that the facts of the case were directly covered by two decisions of the Supreme Court : (1) Chhugamal Rajpal vs. S. P. Chaliha (1971) 79 ITR 603 and ITO vs. Lakhmani Mewal Das (1976) CTR (SC) 220 ; (1976) 103 ITR 437 (SC). The Department had relied on a decision of the Calcutta High Court in ITO vs. Mahadeo Lal Tulsian (supra) and another of the Madras High Court in M. Varadarajulu Naidu vs. CIT (1977) 110 CTR 786 (Cal). The learned Judge pointed out that the interpretation placed by these judgments was contrary to the principles enunciated by the Supreme Court and in particular the decision in the case of Lakhmani Mewal Das (supra).

(3.) IN the appeal it is contended on behalf of the appellants that the learned single Judge had erred in applying the decision of the Supreme Court in ITO vs. Lakhmani Mewal Das (supra). We are unable to accept this contention. Both the decisions of the Supreme Court referred to by the learned Judge are directly in point. In both the cases assessments completed earlier were reopened under S. 147(a) for the purpose of including in the reassessments the amount of certain cash credits the genuineness of which had been accepted at the time of the original assessments. In the case Chhugamal Rajpal vs. S. P. Chaliha (1971) 79 ITR 603 (SC) the assessee had produced at the time of original assessment full details regarding the creditors and the loans in question and the assessment was completed after, enquiry. Thereafter the assessment was reopened because the ITO had received certain communications from the CIT from which it appeared that the creditors were mere name -lenders and the loan transactions were bogus. The ITO, therefore, considered that proper investigation regarding the loans taken by the appellant was necessary and reopened the assessment. This was held to be unjustified.