COMMISSIONER OF INCOME TAX Vs. SHANKAR INDUSTRIES

JUDGEMENT

(1.) IN this reference under s. 256(2) of the IT Act, 1961, for the asst. yr. 1961 -62 the following question of law has been referred to this Court :

(2.) SHORTLY stated the facts are that the assessee is a registered firm. The ITO made the assessment for the asst. yr. 1961 -62, in due course. Subsequently the said assessment was reopened under s. 147(a) of the IT Act, 1961, on the ground that certain hundi loans were not genuine. After having heard the assessee, the ITO made the reassessment and included therein Rs. 1,85,000 as income of the assessee from 'undisclosed sources' and Rs. 15,132 being interest thereon. On appeal, the ITOs action was confirmed by the learned AAC.

(3.) THE only question which arises for consideration is whether there was any material before the ITO to form the belief that by reason of omission of failure on the part of the assessee the income chargeable to tax has escaped assessment. The reasons which have been recorded by the ITO for reopening the assessment are as follows : 'During the course of the assessment proceedings for the asst. yr. 1965 -66, I have occasion to investigate unsecured loans which stood at Rs. 10,27,348 at the close of the accounting year relevant for the said year in the books of the firm. It was noticed that a large number of them were bogus hundi or Khattapata loans or loans from the next of the kith and kin of the partners, genuineness whereof could not be proved by the concern. Hence, the amount credited to some of these accounts will be assessed as income from undisclosed source for a consideration amount. Similar loans are noticed for the asst. yr. 1961 -62 and these stood at Rs. 4,36,582 as per balance sheet ending 2017 R.N.'