COMMISSIONER OF INCOME-TAX VS RAM NARAIN GOEL, 1998 PTD-PUNJAB-AND-HARYANA-HIGH-COURT-INDIA 1447 (1996)

Income-tax---

----Reference---Reassessment---Failure to disclose material facts necessary for assessment---Finding by Tribunal that assessee had disclosed primary and material facts necessary for assessment---Tribunal justified in holding that reassessment proceedings were not valid---No question of law arose---Indian Income Tax Act, 1961, Ss. 147 & 256.

During the course of assessment proceedings for the assessment year 1970-71, cash credits of Rs.35,000 in the name of one BL, son of BR, were noticed. The Income-tax Officer directed the assessee to produce BL to prove the genuineness of the advance made by BL. The assessee stated that BL had turned hostile and produced indirect evidence in the form of a copy of a sale -deed and copies of accounts. The Income-tax Officer on this evidence accepted the genuineness of the cash credit. Subsequently, reassessment proceedings were started and the sum of Rs.35,000 was added as unexplained cash credit. The Tribunal held that the reassessment was not valid. On an application to direct reference.

Held, dismissing the application, that during the original assessment proceedings the credit in question was accepted after due investigation. It could not be said that the assessee had failed to make a true and full disclosure of the material facts. The Tribunal was right in law in cancelling the reassessment. No question of law arose from its order.

R.P. Sawhney with Mahavir Ahlawat for Petitioner.

Nemo for Respondent.

JUDGMENT

ASHOK BHAN, J.---This is a petition under section 256(2) of the income Tax Act, 1961 (hereinafter referred to as "the Act"), relating to the assessment year 1970-71 filed by the Commissioner of Income-tax, Haryana, Rohtak, for issuance of a mandamus directing the Income-tax Appellate Tribunal, Delhi Bench, Delhi (hereinafter referred to as "the Tribunal"), to draw up a statement of the case and refer to this Court the following question of law stated to be arising from the order of the Tribunal, dated October 23, 1989:

"Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in canceling the reassessment by not considering the statement of Shri Basheshar Lal as information to justify action under section 147(a) of the Income Tax Act, 1961, although the deposit has been held bogus by it on the basis of the same statement?"

Shortly stated the facts are that the assessee's assessment year under consideration was originally framed on March 28, 1974. During the course of assessment proceedings, cash credits of Rs.35,000 in the name of one Basheshar Lal, son of Binj Raj of Hansi, were noticed. The Income-tax Officer directed the assessee to produce Basheshar Lal to prove the genuineness of the advance made by Basheshar Lal. The assessee stated that Basheshar Lal was hostile and if contacted would deny the advancement of the loan. Instead of producing Basheshar Lal, the assessee produced indirect evidence in the form of:

(i)copy of sale-deed dated June 22, 1968, by which the said Basheshar Lal sold agricultural land;

(ii)copy of accounts of Basheshar Lal with the Central Bank of India;

(iii)copy of account of Basheshar Lal from the books of Janina Dass Chhabil Dass Cotton Co., Hansi; and

(iv)copy of account of Basheshar Lal from Phool Chand Jugdharmal Jain, Hansi.

The assessment order dated March 28, 1974, however, did not discuss the said credit at all. Later on, the said Basheshar Lal made complaints to the Income-tax Officer alleging that he never advanced the aforesaid sum of Rs. 35,000 to the assessee and on the basis of these complaints, the Income-tax Officer reopened the assessment undersection 147(a) of the Act.

The said Basheshar Lal was summoned and examined during the course of reassessment proceedings. He denied having advanced the aforesaid sum and, therefore, the same was added as unexplained cash credit and the interest claimed by the assessee to have been paid was also disallowed.

The assessee filed an appeal before the Appellate Assistant Commissioner challenging the reopening of the assessment on the ground that the credit was genuine that the assessee had disclosed all primary facts in the earlier proceedings and on a mere change of opinion, the Income-tax Officer could not reopen the assessment proceedings. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer and dismissed the appeal.

The assessee, thereafter, filed second appeal before the Tribunal. It was contended on his behalf that the assessee had placed all relevant materials before the Income-tax Officer in the original assessment and, therefore, even if Basheshar Lai had made some complaint before the Income-tax Officer that could not be treated as fresh information authorizing the Income-tax Officer to reopen the proceedings under section 147(a). The, contention raised by the assessee was accepted by the Tribunal and n was held that the assessee had disclosed all material facts before the Income-tax Officer in the original assessment proceedings. The Tribunal recorded the following finding:

"The Income-tax Officer's information is based on the complaints made by the said Basheshar Lai denying the advancement of loan to the assessee but such an information was already before the Income tax Officer inasmuch as the assessee had himself stated that Basheshar Lai was hostile This meant that Basheshar Lai, if contacted, would deny the advancement of the loan and that was the reason why the assessee produced indirect evidence in the form of the copy of the sale-deed and copy of accounts etc. Therefore, when Basheshar Lai made the said complaint to the Income-tax Officer nothing new can be said to have come to the knowledge of the Income-tax Officer and the investigation was necessitated by the fact that in the original assessment proceedings the assessee had himself stated that Basheshar Lai had turned hostile. Therefore, if in spite of such an assertion by the assessee and if on a perusal of the books of account of the assessee and other documents produced by it the Income-tax Officer accepted the genuineness of the credit and all the expenditure related thereto on account of interest, the Income-tax Officer's action in reopening the assessment under section 147(a) as nothing but an attempt to revise his earlier finding by bringing in additional evidence in the form of the statement of Basheshar Lai. Such a course is not authorized by the provisions of the Income-tax Act and an Income-tax Officer cannot be allowed to make up his default by course to section 147(a) when all that was within the means of the assessee had already been disclosed to the Income-tax Officer and the Income-tax Officer having applied his mind to those facts accepts the assessee's claim. We are, therefore, of the view that in this case the reopening of the assessment under section 147(a) was not permissible and, therefore, the consequent assessment cannot be sustained. "

From the findings recorded b) the Tribunal, it is clear that the assessee had disclosed all primary and material facts before the Income-tax Officer in the original assessment proceedings. As Basheshar Lal had turned hostile the assessee in the alternative produced indirect evidence in the form of copy of sale-deed and copy of accounts, etc. The Income-tax Officer on this evidence accepted the genuineness of the cash credit of Rs.35,000 in the name of Basheshar Lai. During the original assessment proceedings, the credit in question was accepted after due investigation. It could not be said that the assessee had failed to make a true and full disclosure of the material facts. The Income-tax Officer cannot be allowed to make up for his own default by taking recourse to the reopening of the assessment already framed under section 147(a) on a change of opinion. No referable question of law under the circumstances arises from the order of the Tribunal. The question claimed by the Revenue is declined. No costs.

M.B.A./14777/FC Order accordingly.