Case: Sri Krishna Pvt. Ltd. Etc Vs. I.T.O. Calcutta &amp; Ors

2. In the return filed for the Assessment Year 1959-60, the assessee had shown certain hundi loans totalling Rs 8, 53, 298 said to have been taken from a number of persons. The Income Tax Officer accepted the averment and made the assessment. During the assessment proceedings for the succeeding year, 196061, the assessee again showed hundi loans in a sum of more than rupees seventeen lakhs. The Income Tax Officer enquired into the truth of the averment and found that many of them were bogus claims while some of the alleged lenders were found to be near relations of directors or principal shareholders of the assessee. The Income Tax Officer held that out of the hundi loans of more than rupees seventeen lakhs claimed by the assessee, loans totalling Rs 11, 15, 275 were not established to be genuine loans and accordingly added that amount as income from undisclosed sources. Having regard to the similarity of the claims and the persons who are said to have advanced the said unsecured hundi loans during the accounting year relevant to the Assessment Year 195960, the Income Tax Officer issued a notice under Section 148 calling upon the assessee to file a revised return for the Assessment Year 1959-60. Immediately, upon receiving the said notice, the assessee approached the Calcutta High Court by way of a writ petition questioning the validity of the notice on, the grounds that the Income Tax Officer had no reasonable ground to believe that income chargeable to tax has escaped assessment for the said year on account of any omission or failure on his part to make a full and true disclosure of all material facts. The writ petition was allowed by a learned Single Judge, as stated above, whose decision has been reversed in appeal by the Division Bench. This Court entertained the special leave petition filed by the assessee and granted leave on 26-7-1977. This Court, however, did not stay the proceedings pursuant to the impugned notice. It directed that the Income Tax Officer may proceed to complete the assessment proceedings but will not issue a demand notice. The Income Tax Officer has accordingly completed the reassessment

Reasoning: In the reasons recorded by the Income Tax Officer [as required by Section 148(2) 1, he had stated clearly that in the course of assessment proceedings for the succeeding assessment year, it was found that out of the unsecured hundi loans put forward by the assessee, a large number were found to be bogus and that many of the so-called lenders were found to be near relations of the Directors or the principal shareholders. He stated that similar loans are also noticed for the Assessment Year 1959-60 and, therefore, he has reason to believe that there has been no true and full disclosure of all material facts by the assessee for the Assessment Year 1959-60 leading to escarpment of income. It is not alleged by the assessee that the Income Tax Officer had not checked up or tallied the names of the alleged lenders for both the assessment years and that he merely went by the fact that there were unsecured hundi loans for both the assessment years. In the absence of any such allegation - which allegation, if made, could have afforded an opportunity to the Income Tax Officer to answer the said averment - we must presume that the Income Tax Officer did find that a large number of alleged lenders who were found to be bogus during the Assessment Year 1960-61 were also put forward as lenders during the Assessment Year 1959-60 as well. Evidently, this is what he meant in the context, when he spoke of "similar loans" being noticed for the year in question as well. In such a situation, it is impossible to say that the Income Tax Officer had no reasonable ground to believe that there has been no full and true disclosure of all material facts by the assessee during the relevant assessment year and that on that account, income chargeable to tax had escaped assessment. As we shall emphasise hereinafter, every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure may be a false one or true one. It may be a full disclosure or it may not be. A partial disclosure may very often be a misleading one. What is required is a full and true disclosure of all material facts necessary ~for making assessment for that year. This calls for an examination of the decisions of this Court analysing and elucidating Sections 147 and 148 of thecannot agree. The principle is well settled by Calcutta Discountand it is not reasonable to suggest that any different proposition was sought to be enunciated in the said decisions. Calcutta Discount emphasises repeatedly the assessees obligation to disclose all material facts necessary for his assessment fully and truly in the context of the two requirements - called conditions precedent which must be satisfied before the Income Tax Officer gets the jurisdiction to reopen the assessment under Sections 147/148. This obligation can neither be ignored nor watered down. Nor can anyone suggest that a false disclosure satisfies the requirement of full and true disclosure. All the requirements stipulated by Section 147 must be given due and equal weight. Finality of proceedings is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year - and not to others. 411 the decisions relied upon by Shri Gupta have been elaborately discussed and distinguished in Phool Chand Bajrang Lal and we fully agree with the same. We think it unnecessary to repeat those reasons. In particular, we agree with the reasons given in Phool Chand Bajrang Lal for holding that the decision of this Court in Burlop Dealers must be confined to the particular fact-situation of that case and that it cannot be construed to be of universal application irrespective of the facts and circumstances of the case before theneed not, however, dilate on this aspect for the reason that no argument has been urged before us to the effect that since the notice under Section 148 is found to be justifiable in respect of some loans disclosed and not with respect to other loans, it isis necessary to remember that we are at the stage of reopeningit is that Income Tax Officer could have investigated the truth of the said assertion which he actually did in the subsequent assessment year - but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact - and not an inference, factual or legal, to be drawn from given facts. In this case, it is shown to us that ten persons (who are alleged to have advanced loans to the assessee in a total sum of Rs 3, 80, 000 out of the total hundi loans of Rs 8, 53, 298) were established to be bogus persons or mere name-lenders in the assessment proceedings relating to the subsequent assessmentWe are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under Sections 148/147. The enquiry at this stage is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escarpment of income is established. It is necessary to keep this distinction in mind