PUSA LAL A Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) : This reference arises under the IT Act. The Tribunal makes this reference at the instance of the assessee in connection with the asst. yr. 1974-75 and refers the following question of law for the consideration of this Court:

(2.) IT is necessary to notice the facts relevant for the purpose. For the income-tax asst. yr. 1974-75, the assessee had filed his return of income declaring an income of Rs. 17,635 which was accepted under s. 143(1) of the IT Act (for short the " Act "). For the subsequent year 1975-76, when the ITO was scrutinising the balancesheet filed by the assessee, it was noticed that there was a balance of Rs. 26,805 outstanding due from Birla Bazar at the end of the accounting year relevant for the asst. yr. 1975- 76. The ITO investigated into the matter and found that the aforesaid sum of Rs. 20,000 represented two items of loan given by the assessee to the Birla Bazar. The loans were given on September 10, 1973, Rs. 5,000 and on October 22, 1973, Rs. 15,000. IT was found that the loan transactions related to the previous year relevant to the income-tax asst. yr. 1974-75. The ITO noticed that the balancesheet as on October 24, 1973, consisting of assets and liabilities filed for the income-tax asst. yr. 1974-75 did not include the debt of Rs. 20,000 and the interest outstanding thereon. On the aforesaid facts, the ITO prima facie came to the conclusion that there was an omission or failure on the part of the assessee to disclose fully and truly all the material facts relevant for the asst. yr. 1974- 75. In that view, he initiated proceedings under s. 147(a) of the Act by issuing a notice under s. 148. During the course of reassessment proceedings for the year 1974- 75, the assessee was called upon to explain the origin and the source of the two items of loans given to Birla Bazar. Apparently, the assessee was not in a position to offer any explanation whatsoever. In those circumstances, the ITO treated the aggregate of the two loans amounting to Rs.. 20,000 as income from undisclosed sources liable to be assessed under s. 69A of the Act.

(3.) WE are unable to accept either of the contentions urged by learned counsel. It may be borne in mind that during the course of the assessment enquiry for the year 1975-76, all that the ITO came to know was that the assessee had lent Rs. 20,000 to Birla Bazar and that there were grounds to think that the said loan transaction was not accounted for. The ITO derived only prima facie satisfaction to come to the conclusion that there was an omission or failure on the part of the assessee to disclose fully and truly all the material facts relating to the asst. yr. 1974- 75. These ingredients at once give jurisdiction to the ITO to reopen the assessment. It is only after reopening the assessment that the ITO makes a real enquiry into the origin and source of the sums lent, examines, the matter with reference to the explanation, if any, furnished by the assessee and then comes to a proper conclusion whether or not the whole or any part of the sum of Rs. 20,000 was liable to be taxed as income. It cannot,therefore, be said that, at the point of time when the reassessment proceedings were initiated under s. 148 taking the aid of s. 147(a), the reassessment proceedings were taken specifically for the purpose of including the " deemed income " in the financial year 1973-74 corresponding to the asst. yr. 1974-75.