INCOME TAX OFFICER Vs. MAHADEO LAL TULSIAN

JUDGEMENT

(1.) This is an appeal under Clause 15 of the Letters Patent preferred by the revenue and it is directed against the judgment and order dated March 22, 1974, passed by A. K. Mookerji J, in Civil Rule No. 607(W) of 1971 [Mahadeolal Tulsyan v. Income-tax Officer, whereby the learned judge set aside a notice under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as the "said Act"), and quashed all proceedings initiated thereon.

(2.) Messrs. Calcutta Hardware Store, of which the sole respondent is a partner, was assessed to income-tax for the assessment year 1961-62 on a total income of Rs. 87,227 by the Income-tax Officer, "I" Ward, Hundi Circle, Calcutta, on February 22, 1962. At the said assessment the assessee-firm filed copies of their accounts including the profit and loss account, balance-sheet and loan account. Such loans obviously included a number of hundi loans and the assessee-firm also claimed credit for the interest alleged to have been paid on such loans. The Income-tax Officer making the assessment accepted the loans to be genuine and granted credit for the interest alleged to have been paid on such loans. On March 30, 1970, the successor-in-office of the Income-tax Officer, " I " Ward, Hundi Circle, Calcutta, issued the impugned notice under Section 148 of the said Act proposing to reassess the income for the' said year 1961-62 on the ground that he had reason to believe that the assessee's income chargeable to tax for the assessment year 1961-62 had escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961. The notice further recited that such a notice was being issued on obtaining the necessary satisfaction of the Commissioner, of Income-tax, West Bengal-I. The respondent disputed the validity of such a notice under Section 148 and the proceedings for reassessment based on such a notice in a writ petition on which the above rule was issued. According to the respondent the impugned notice was not based on any seasonable belief and, in any event, there were no materials on which any such bona fide belief could have been arrived at by the Income-tax Officer when he proceeded to issue the impugned notice. It was further claimed by the respondent that there was full, fair and true disclosure of all basic facts including the hundi loans at the time of the original assessment and the Income-tax Officer making the assessment accepted such loans to be genuine and allowed the claim of interest paid on such loans to the creditors. The successor-Income-tax Officer, according to the respondent, could not have lawfully initiated the proceedings for reassessment on a notice under Section 148 merely on a different opinion being entertained by him in regard to the said loan transactions. It is further claimed that there was no valid and lawful satisfaction on the part of the Commissioner of Income-tax under Section 151(2) of the said Act, and, as such, the impugned notice was clearly beyond the sanction of law.

(3.) In contesting the aforesaid writ petition, the Income-tax Officer filed an affidavit, in paragraph 6 whereof he stated : " At the time of the original assessment the assessee-firm filed some copies of accounts including profit and loss account, balance-sheet and loan account but the said loan account did not include the list of hundi loans. Subsequently, during the course of assessment for the year 1964-65 comp leted on 28th August, 1968, and also for the assessment year 1965-66 it was found by the Income-tax Officer that the assessee introduced cash credits in the form of hundi loans which were not genuine as there was no confirma tion either of the parties advancing the loans nor any other evidence about the loan transaction was furnished and produced before the assessing Income-tax Officer. Therefore, I deny that the facts relevant to the said assessment year were fully and truly disclosed and brought to the know ledge of the Income-tax Officer making the assessment as alleged in 1961-62 and it came to light in the course of assessment for the year 1964-65 and 1965-66 that the hundi loans were not genuine." Such was the case for issue of the impugned notice made by the Income-tax Officer in his opposition wherein he disputed the claim of the respondent that at the time of the original assessment there was full and true disclosure of all the facts and he further denied the suggestion that the impugned notice had been issued merely tiased on a change of opinion. It was further disputed that the satisfaction recorded by the Commissioner was not in accordance with law.