RAWATMALL MOHANLAL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) This appeal is directed against the order passed by the learned Single Judge dt. 16th July, 1976, whereby the learned Single Judge has dismissed the writ petition" and held that the notice for reopening of the assessment of the incumbent for the year 1958-59 under Section 148 of the IT Act, 1961 (hereinafter referred to as the Act of 1961), is valid.

(2.) The brief facts which are necessary for disposal of this appeal are that a notice was issued on 25th March, 1975, under Section 148 of the IT Act, 1961, for reopening the assessment for the year 1958-59. The previous reopening order was set aside by the Tribunal. It is alleged that sanction of the Central Board of Direct Taxes (CBDT) was obtained on 22nd March, 1975, for this second reopening notice. The previous reopening of the assessment was done, on the basis that there was hundi loan credits in the names of various parties who were known as name lenders. In the original assessment, loan credits from these parties were accepted without investigation. But subsequently, it was found that some of the hundiwalas whose names appear in the list of creditors of the assessee made confessional statements before the Department that they were mere name lenders. Therefore, it was found that the hundi loans figuring in the books of account of the assessee were not genuine and the loan amount was nothing but the assessee's own undisclosed income. The papers which were placed before the Commissioner of Income-tax (CIT) for sanction, reference of some confessional statements was made, out of which the statement of Jethanand Madhavdas was also made from whom the assessee took loan. But that confessional statement was recorded on 6th Aug., 1968. This confessional statement was not in existence when the proceedings were initiated for reopening on 10th Feb., 1967. The previous reopening of the assessment was challenged before the Appellate Assistant Commissioner of Income-tax (AAC). The same was set aside by the AAC on the ground of non-application of mind because the confessional statement of Jethanand Madhavdas was not in existence at the time of initiation of reopening of assessment in the year 1967. It was observed that there is no material to show that there was any entry in the accounts of the assessee pertaining to the asst. yr. 1958-59 from any of the confessional statements which were there at the relevant time that is the confessional statements of Kanyalal Hotchand and Mohansingh Kanyalal and it was found that the confessional statement of Jethanand Madhavdas relates to this loan amount but that statement was recorded on 6th Aug., 1968, therefore, that confessional statement was not there at the time when the reopening notice was issued. It was held that other confessional statements of Kanyalal Hotchand and Mohansingh Kanyalal does not relate to any hundi loan by these persons during 1958-59. Therefore, the AAC came to the conclusion that the proposal which was given by the ITO and approved by the CIT only by putting a rubber stamp without ascertaining whether the facts stated by the ITO warrant reopening of the assessment or not. The matter was taken up in appeal by Revenue before the Tribunal and the Tribunal affirmed the view taken by the AAC that the reassessment proceedings of 1958-59 were not initiated validly. After the decision of the Tribunal a second notice was issued for reopening of the assessment on 25th March, 1975, on the basis of the confessional statement of Jethanand Madhavdas. This was challenged by the petitioner by filing this writ petition. The learned Single Judge after going through the records erroneously proceeded on the basis of the confessional statement of Giridharisingh Jhamansingh and found that the reopening to be justified, but there appears to be a little typographical mistake that it is not Giridharisingh Jhamansingh but it is Jethanand Madhavdas who has given a confessional statement in 1968 that impelled the authorities to reopen the assessment in 1975. However, the learned Single Judge referred to the statement of Giridharisingh Jhamansingh whereas it should have been the statement of Jethanand Madhavdas wherein it was categorically stated that Jethanand Madhavdas was only a name lender and he did not advance any hundi loans. The learned Single Judge found the reopening to be valid and dismissed the writ petition. Aggrieved against this order, the present appeal has been filed by the assessee challenging the order of the learned Single Judge on two grounds; firstly, that once the earlier reopening of the assessment having been set aside by the AAC and affirmed by the Tribunal, this second reopening could not have been opened by the Department; secondly, that there is no material whatsoever to reopen the assessment.

(3.) We have heard learned counsel for the parties and perused the records. It is true that the first assessment which was reopened but not found to be validly initiated by the Tribunal and no further step was taken by the Revenue to challenge the same. Therefore, the question is whether when the first reopening of the assessment having been set aside by the Tribunal, can this second reopening be done or not.