Income Tax Appellate Tribunal - Amritsar
Durga Prashad Goyal vs Ito on 30 November, 2005
Equivalent citations: [2006]98ITD0227S(ASR)
ORDER
Bhavnesh Saini, JM.
Hon'ble President of the Income Tax Appellate Tribunal has constituted a Special Bench under section 255(3) of the Income Tax Act and referred the following questions:-
"(i) Whether, on the facts and in the circumstances of the oase, the re-assessment proceedings intimated by the assessing officer and confirmed by the Commissioner (Appeals) are valid?
(ii) If answer to question No. 1 above is in affirmative, as to whether the cash credits introduced by the assessee(s) are genuine?"
2. Learned representatives of both the parties have stated that basic facts in all these cases are common. We, therefore, proceed to dispose of all the appeals by this common consolidated order for the sake of convenience.
3. We have heard learned representatives of both the parties and gone through the observation of the authorities below and examined the rival submissions in the light of the material placed before us. The learned counsel for the assessee submitted that the assessees in ITA Nos. 378/95, 377/95,380/95 and 389/95 have moved application for admission of the additional ground of appeal which reads as under:-
"That the notice issued under section 148 in this case was invalid, barred by time and without recording any valid reasons for reopening of assessment and, therefore, the action of the assessing officer of reopening the assessment under section 147 is illegal and the said action has wrongly been upheld by the DCommissioner (Appeals) Jalandhar."
4. The learned counsel for the assessee submitted that the legality and initiation of proceedings under section 147 of the Income Tax Act have already been challenged in the case of the assessee Durga Parshad Goyal and a specific ground has been taken in the grounds of appeal. Learned counsel for the assessee submitted that the additional ground so raised is legal in nature which was taken before the authorities below. Learned counsel for the assessee further submitted that since the issue raised in the additional ground arises from the order of the authorities below and a reference is also made to the Special Bench on the same issue, therefore, the same may be admitted for hearing. Learned Departmental Representative, however, opposed the request of learned counsel for the assessee and submitted that section 148 is meant for the department and it is the fundamental duty to unearth the undisclosed income. Therefore, department should not be stopped midway from making the investigation. He, accordingly, submitted that additional ground may not be admitted.
5. On consideration of the above facts, we are of the view that the additional ground raised in four appeals is legal in nature which was also agitated before the DCommissioner (Appeals) and no fresh investigation on facts is required, in case the additional ground is admitted. Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 held:-
"Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee."
We, accordingly, admit the additional ground in four of the appeals as mentioned above.
6. The facts as taken from one of the appeals of Durga Parshad Goyal are that original assessments for the assessment years 1982-83 and 1983-84 were made in this case under section 143(1) vide orders dated 30-6-1983 and 30-11-1983 respectively.
7. The assessments were reopened on the receipt of information indicating that searches conducted on the business and residential premises of Shri Parshotam Dass and its associate concern and other related persons coupled with allied enquiries made revealed that the assessee had received /introduced bogus credits of Rs. 20,000 and Rs. 30,000 (OB of Rs. 20,000 plus Rs. 10,000 new) for assessment years 1982-83 and 1983-84 respectively in the name of M/s. Ram Kumar Parshotam Dass who was not actually the money lender but was engaged in the racket of name lending only. Notices under section 148 were issued for assessment years 1982-83 and 1983-84 on 30-3-1989 which were served upon the assessee on 31-3-1989. In response thereto, the assessee filed letters on 1-5-1989 separately for assessment years 1982-83 and 1983-84 stating therein that he had already filed the income tax returns in respect of assessment years 1982-83 and 1983-84 which might be treated to have been filed in response to notice under section 148 of the Income Tax Act. The assessee objected to the legality of the initiation of reassessment proceedings on the plea that full facts of credits were before Income Tax Officer at the time of regular assessments, so the notices under section 148 could not be issued. The assessee also objected to the initiation of reassessment proceedings contending that the case was covered under clause (b) of section 147 and not under clause (a) of section 147 and that since the notice under clause (b) of section 147 had to be issued within a period of four years, therefore, the notices issued were beyond the time provided under the law. The legality of the initiation of reassessment proceedings were also objected to on the plea that subsequent information to the assessing officer that money lenders were not genuine did not justify the reassessment proceedings. However, the contention of the assessee did not find favour with the assessing officer. The assessing officer also called upon the assessee to prove the genuineness of the loan transaction and in response thereto, the assessee filed confirmation letter. However, the creditor was not produced. On these facts, the assessing officer was of the view that cash credit is not genuine. The assessing officer also pointed out that the enquiries made by the department have revealed that Shri Parshotam, Dass and his associate concerns namely Ram Kumar Parshotam Dass, Jai Shankar Karyana Traders & Yogesh Kumar S/o Shri Parshotam Dass and Smt. Savitri Devi, W/o Sh. Purushotam Dass were engaged in the business of name lending on a vast scale. The assessing officer, accordingly, rejected the contention and made the addition in both the assessment years. The assessment order was challenged before the DCommissioner (Appeals). Same submissions were made before Deputy Commissioner of Income Tax (Appeals). However, appeal of the assessee was dismissed.
8. Learned counsel for the assessee argued that orders of the authorities below were not in accordance with the law because the assessing officer had no reason to believe that income chargeable to tax had escaped assessment. He has submitted that cash credits were shown in the regular returns and only list is attached with the letter of ACommissioner of Income Tax, Inv. Circle, Bhatinda giving the name of the parties but no material or evidence of bogus credit is available with the department. He further submitted that there is no denial by the creditor to show that -credits were bogus. He has further submitted that no material was filed to show as to how credits are bogus. Learned counsel for the assessee submitted that no material whatsoever was brought on record to justify the contention of bogus credits. He has further submitted that no confessional stateirient of Shri Parshotam Dass or his associate was recorded. He, accordingly, submitted that at the most, the assessing officer was having some suspicion but suspicion cannot taken as "belief" of the assessing officer that the cash credits are not genuine. Learned counsel for the assessee submitted that the reasons recorded by the assessing officer have been filed by the department on record but, in fact, there is no evidence to show that said Shri Parshotam Dass or his associate had at any stage stated that the loan transaction with the assessee was ingenuine. Even if some statement of Smt. Savitri Devi W/o Sh. Parshotam Dass was recorded, but there was no reference of loan transaction with any assessee and, as such, it was not open to the department to initiate reassessment proceedings. He has pointed out that general statement made by a person disowning loan transaction with certain parties, not including the name of the asscssee, could not empower the assessing officer to initiate reassessment proceedings. Learned counsel for the assessee further submitted that the similar questions were referred to the Special Bench by Hon'ble President of ITAT in the case of Assam Tea Co. v. ITO (2005) 92 ITD 85 (Asr-Trib) in which the referred questions challenging the initiation of the proceedings under section 147 were decided by Income Tax Appellate Tribunal Special Bench Amritsar in f avour of the asscssee in Assam Tea Co. (supra). Learned counsel for the assessee submitted that the point in issue is squarely covered by earlier order of ITAT Amritsar Bench (Special Bench) in the case of Assam Tea Co. (supra). Learned counsel for the assessee also relied upon the decision of Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Das ( 1976) 103 ITR 437 (SC).
9. On the other hand, learned DR submitted that the assessee in his written submission admitted that the notice under section 147 is valid but assessment is not valid. Learned DR further reiterated that section 148 is meant for the department to unearth, undisclosed and escaped income. Therefore, it was the fundamental duty of the revenue department to proceed under section 147 in order to achieve the intent and purpose of the Act. He has further submitted that the revenue department should not be stopped from investigation of the case by quashing the initiation of the proceedings under section 147 of the Income Tax Act. Learned Departmental Representative relied upon the order of ITAT Amritsar Bench (Third Member) decision in the case of Gopi Chand Prem Kumar v. ITO (2001) 71 TTJ 627 (Sr-Trib)(TM) and decision of Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 (SC) and order of ITAT Amritsar Bench in the case of Asstt. CIT v. Sachdeva & Sons (2005) 97 ITD 425 (Asr-Trib). Copies are filed. Learned DR submitted that evidence is material but not the confessional statement. He has further submitted that material with assessing officer was enough to hold that hawala transactions were carried out and cash credits in the aforesaid case are bogus. Learned Departmental Representative further submitted that confessional statement is not material but material information is necessary. He has further submitted that statement of Smt. Savitri Devi was recorded which justified the initiation of proceeding under section 147 of the Income Tax Act. Learned Departmental Representative however, could not say as to whether the decision of Special Bench in the case of Assam Tea Co. (supra) is challenged by the revenue before the High Court or not. Learned Departmental Representative submitted that the ACommissioner of Income Tax, Inv. Circle, in his letter to the assessing officer pointed out bogus credits and name lending racket and also supplied a list in which the name of the assessee is appearing. He has submitted that report of investigation has some weight.
10. We have considered the rival submissions in the light of the material placed before us and the decisions relied upon by learned representatives of both the parties. Before proceeding further in the matter, we would like to mention that the questions which were referred to the Special Bench are identical questions which were also referred to by Hon'ble President to the Special Bench in the case of Assam Tea Co. (supra) in which the Special Bench of ITAT Amritsar Bench decided the identical referred questions in favour of the assessee and reassessment proceedings were quashed. The finding of ITAT Amritsar Special Bench in paragraphs 6 to 6.9 are reproduced as under:-
"6. We have considered the rival submiss4ons in extenso in the light of material placed before us and precedents relied upon. The primary question that falls for our consideration is to decide as to whether the reassessment proceedings initiated by the assessing officer and confirmed in the first appeal were valid or not. Before going to this question, it would be apposite to deal with the contention raised by Mr. Bansal to the effect that the assessing officer having accepted the transaction in original assessment proceedings could not have initiated the reassessment proceedings on the same facts. Section 147, prior to its substitution by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1-4-1989 had two clauses, namely (a) and (b). In the present appeals, we are concerned with the unamended provisions. Relevant portion of clause (a) of section 147, empowers the assessing officer to assess or reassess any income, where he has reason to believe that by reason of the omission or failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, any income chargeable to tax has escaped assessment. It shows that the proceedings under section 147(a) read with section 148 can be initiated if two conditions are satisfied, namely, (i) the assessing officer must have reason to believe that the income chargeable to tax has escaped assessment and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for that year, or to make a return under section 139 for the assessment year to the assessing officer. Both the conditions should be cumulatively satisfied to confer jurisdiction with the assessing officer to initiate the proceedings. The key words used in this clause are "to disclose fully and truly all material facts". So long as the disclosure made by the assessee is full and true of all the material facts, the intention of the assessee cannot be questioned. If, however, the subsequent events, after the completion of the assessment, belie the claim of the assessee made at the assessment stage, it cannot be said that the disclosure earlier made was "full and true". Any information coming to the possession of the assessing officer which is specific, reliable and relevant that was not previously disclosed or which exposes the untruthfulness of the facts given by the assessee at the assessment stage, certainly empowers the assessing officer to start reassessment proceedings subject to the provisions of this Act. It is immaterial that the assessing officer at the time of making original assessment could have found on further inquiry or investigation that the transaction was genuine or not. This is the mandate of the decision of the Hon'ble Apex Court in the case of Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 (SC). This leads us to an irresistible conclusion that there are no fetters on the power of the assessing officer to initiate reassessment proceedings in respect of transaction which was examined by him at the time of original assessment, if the subsequent events lead him to believe that any income chargeable to tax has escaped assessment by reason of non-disclosure or wrong disclosure of the primary facts at the assessment stage.
6.1 Adverting to the facts of the cases under consideration, it is seen that the reassessment proceedings were initiated on the strength of some material gathered during the course of search at the residential and business premises of Sh. Parshotam Dass, on the basis of which the assessing officer came to the conclusion that the credits introduced by these assessees in their books of account in the name of M/s. RKPD were bogus as Sh. Parshotam Dass was only a name-lender. The stand of the aforesaid two cases is that the amounts were received through banking channels from M/s. RKPD which was a firm and the statement of Smt. Savitri Devi W/o Sh. Parshotam Dass, a stranger to the firm was inconsequential insofar as the transactions of the assessee with the said firm were concerned.
6.2 At this juncture, it would be relevant to get enlightened from certain judicial precedents on this point. In the case of Kashmiri Lal Kasturi Lal & Co. v. CIT (1989) 177 ITR 477 (P&H), the Income Tax Officer found in the account books of the assessee that firm 'G' had advanced a sum of Rs. 20,000 to the assessee by way of cash credit. At the time of original assessment, it did not come to light whether 'G' had really advanced by way of cash credit or was merely a bogus firm lending its name. Later on when the assessment proceedings were initiated against 'G', it transpired that it had indulged in Hawala business with various parties including the assessee and that firm merely lent its name to the assessee and no amount was in fact advanced. In this case, the Tribunal found that the Income Tax Officer had reason to believe on the basis of subsequent information that the assessee had earlier failed to disclose the material facts and hence the reassessment proceedings were held to be valid. It was held by the Hon'ble High Court that the Tribunal was right in holding that the action under section 147(a) of the Act was rightly taken by the Income Tax Officer against the assessee.
6.3 In the case of Kirpa Ram Ramji Dass v. ITO (1982) 135 ITR 68 (P&H), the assessee had shown a sum of Rs. 95,000 as having been borrowed from five persons and the assessment was completed. Subsequently, as a result of investigation and raids carried out by the Income Tax Department it came to light that numerous parties including five parties mentioned in assessee's return were engaged in the Hawala business. The Income Tax Officer issued notice under section 147(a) and the assessee filed a writ petition to quash the notice. In this case, it was contended on behalf of the petitioner that in the statements of the persons there was no reference of the name of the petitioner firm and, therefore, the said statement should be taken to be not relevant material. This contention was repelled by observing that "when the bogus Hawala Hundi proprietors, namely, Meghraj, etc., in categorical terms stated that they did not advance loans to any persons whatsoever, it would automatically mean that no loan was advanced to the petitioner and the loans shown in their names were in fact bogus transactions brought on record" (Emphasis herein italic printed supplied). In the light of these facts, reassessment proceedings were held to be validly started.
6.4 In yet another case, Hazi Amir Mohd. Mir Ahmed v. CIT (1977) 110 ITR 630 (P&H), the assessing officer inquired about the genuineness of certain cash credits found in the assessee's books at the assessment stage and accepted them as true and completed the assessment. Later on, Hundi racket operating on all India basis was unearthed and some of creditors shown in the balance sheet of the assessee made confessional statements to the effect that they were lending names and not money. The assessing officer re-opened the assessment of the assessee and added a sum of Rs. 1,60,000 to his income. The appeals before the Appellate Assistant Commissioner and the Tribunal were unsuccessful. When the matter travelled to the Hon'ble High Court, it was observed that even though breaking of a Hawala racket on all India basis could not have a rational connection with the loans of the assessee, yet confessional statements of the creditors might have a rational connection with the loans of the assessee. It was found that the material was not available in the order of the Tribunal as to whether the confessional statements related in any manner with the loans to the assessee or not. It was finally held that the Tribunal would be justified in upholding the re-opening of the assessment under section 147(a), if the confessional statements were in any manner related to the assessee; other not.
6.5 In the case of Phool Chand Bajrang Lal (supra), the assessee had claimed that it had borrowed a sum of Rs. 50,000 from a Calcutta Company. Such loan was stated to have been raised and returned in cash though interest on such loan was paid by cheque/bank draft. During the assessment proceedings, the Income Tax Officer finalized the return by allowing deduction of such interest. Thereafter, he entertained some doubts about the genuineness of the loan transaction. An inquiry from his counterpart at Calcutta revealed that the Calcutta Company had not advanced any loans to any person. The Income Tax Officer of the assessee examined the Managing Director of the Calcutta Company who admitted that he had made a confession to the Income Tax Officer at Calcutta, that the company had not advanced any loan to any person. It was on the basis of these facts that the Hon'ble Summit Court held that the initiation of re-assessment proceedings as valid.
6.6 The legal principles, relevant to the issue in question, that can be culled from the survey of the aforesaid Apex Court and the jurisdictional High Court decisions can be summed up as under:
(a) In general, if the events subsequent to the completion of the assessment show that the assessee had recorded false entries in its account books, the assessing officer would be justified under section 147(a) to initiate reassessment proceedings provided the information gathered after the completion of the assessment is specified, reliable and relevant.
(b-i) In particular the initiation of reassessment proceedings would be valid, if the alleged creditor confesses that the so-called loan transaction with the assessee was ingenuine and he acted merely as a name-lender.
(b-ii) The initiation of the reassessment proceedings would be invalid where the alleged creditor confesses or states that he was a name-lender to some parties but the name of the assessee is not appearing in such list.
6.7 Now we will move ahead in testing the instant cases the touchstone of the above-extracted principles. Reverting to the facts under consideration, there is no quarrel on the point that the entries in the name of M/s. RKPD were appearing in the books of account of the assessees in question which was a partnership firm in which Sh. Parshotam Dass was partner and the said firm was dissolved on 31-3-1987. Search proceedings were taken against Sh. Parshotam Dass on 31-3-1989 on the basis of which the department has made out a case that the transactions appearing in the books of these assessees are ingenuine as the said Sh. Parshotam Dass was a man of little means, hardly having any capacity to advance the loans and he, ergo, acted only as a name-lender to these parties. It is an admitted position on behalf of the departmental that no statement of Sh. Parshotam Dass was recorded either at the time of search at his premises or during the course of assessment proceedings. The entire case of the revenue is erected on the edifice of the small capacity of Sh. Parshotam Dass. It is true that Smt. Savitri Devi, W/o Sh. Parshotam Dass in her statement recorded on the occasion of search of her husband categorically stated that she had never advanced any loan to anybody during the last 8 years. She was asked if she knew Sh. Sushil Kumar, Sh. Ashok Kumar, Bhagwati Devi, in response to which she stated that neither she knew these persons nor any loan was advanced to them. It was further inquired whether she knew Parkash, Mahavir Pd. S/o Sh. Devi Dayal, Krishan Goel S/o Sh. Krishna Murari Goel and whether she had any transaction with them for the last 3 years, it was stated that she did not know these persons nor any transaction was made with them. On an examination of her preliminary and concluding statements, it becomes abundantly clear that no question was asked regarding financial transactions of her husband with any party. Nothing was placed on record by the revenue to show that the search unearthed any specific incriminating material casting doubt over the genuineness of the transactions of M/s. RKP with these assessees. No statement, much less the confessional statement of Sh. Parshotam Dass, was recorded at any stage that could show that he had lent his name or of his associated concerns to the assessees in question. The department swing into action by initiating the reassessment proceedings only on the basis of all the entries in the books of account of Sh. Parshotam Dass and his allied concerns, without establishing any clear-cut connection of name lending by Sh. Parshotam Dass with the assessees in question. It is pertinent to note that M/s. RKPD was a partnership firm. Neither statement of Sh. Parshotam Dass nor that of any other partner of the said firm was recorded which could justify the initiation of reassessment proceedings. It is true that the attending circumstances such as the small financial capacity of Sh. Parshotam Dass to lend huge money create a strong suspicion in the minds of the officers of the department, but the suspicion however strong can't take the place of the reasons to believe about the escapement of income. As a matter of fact, it provides a valuable clue for the detailed and deep investigation that the assessee had not made a full and true disclosure of his income. Unfortunately, the steps of converting suspicion into belief about the escapement of income in the instant cases, were completely lost sight of. Except for the statement of Smt. Savitri Devi, denying her involvement in any genuine loan transactions, there is no material with the department to justify the initiation of the reassessment proceedings in the cases under scrutiny, which in our considered opinion is not sufficient to sustain the reassessment for the manifest reason that the credits in the books of these assessees were appearing in the name of M/s. RKPD, in which Smt. Savitri Devi was not a partner. The position would have been otherwise calling for further examination at our end if the credit entries had been appearing in her own name. A minimum that was required as to record the statement of Sh. Parshotam Dass during the course of his assessment proceedings or in the cases of these assessees, if he was not available during the course of search on 31-3-1989. Under such circumstances, we are not persuaded to uphold the initiation of the reassessment proceedings, which are hereby quashed. We, therefore, answer first question in negative. In view of our answer to question No. 1, the second question becomes academic only.
6.8 M/s. Ashoka Industries, the appellant in three years has also challenged the levy of interest under sections 139(8) and 215 in the reassessment proceedings. As the proceedings and the consequential assessment under section 148 are annulled, there cannot be any question of charging interest under these sections.
6.9 In the result, the appeal(s) of M/s. Assam Tea Co; and those of M/s. Ashoka industries are hereby allowed."
Learned representatives of both the parties have conceded before us that material facts are identical.
It is admitted fact that in the present case also, statement of Shri Parshotam Dass is not recorded. The notice under section 148 was issued on 30-3-1989 and was served upon the assessee on 31-3-1989, i.e., prior to the amendment in section 147 of the Income Tax Act.
Section 147 of the Income Tax Act prior to the substitution by Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989, stood as under:-
(a) 'off the assessing officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the assessing officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the assessing officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 and 153, assess or reassess such income or-recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year).
Explanation 1.For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-
(a) where income chargeable to tax has been under-assessed; or
(b) where such income has been assessed at too low a rate; or
(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income Tax Act, 1922 (11 of 1922); or
(d) where excessive loss or depreciation allowance has been computed.
Explanation 2.-Production before the assessing officer of account books or other evidence from which material evidence could with diligence have been discovered by the assessing officer will not necessarily amount to disclosure within the meaning of this section."
11. In the present appeals, we are concerned with the unamended provisions. The relevant provision of clause (a) of section 147 empowers the assessing officer to assess or reassess any income, where he has reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, any income chargeable to tax has escaped assessment. It shows that proceeding under section 147(a) read with section 148 can be initiated if two conditions are specified, namely, (i) the assessing officer must have reason to believe that income chargeable to tax has escaped assessment and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for that year or to make a return under section 139 for the assessment year to the assessing officer. Both the conditions should be cumulatively satisfied to confer jurisdiction to the assessing officer to initiate the proceedings. So long as the disclosure made by the assessee is full and true of all the material facts, the intention of the assessee cannot be questioned. If however, the subsequent events, after completion of the assessment, belie the claim of the assessee made at the assessment stage, it cannot be said that the disclosure earlier made was full and true. Hon'ble Supreme Court in the case of Lakhmani Mewal Das (supra) held:-
"The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income Tax Officer is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income Tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law."
12. In the aforesaid case, the whole case depends upon the search conducted on the business and residential premises of Shri Parshotam Dass. However, the confessional statement of Shri Parshotam Dass was not recorded. No material is brought on record except the list of the ACIT, Inv. Circle, giving the name of the assessee for name lending credit by Parshottam Dass & Associates. No material is indicated as to how the assessing officer had formed his belief that by reason of the omission or the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that year, income chargeable to tax has escaped assessment for that year. Since no material is brought on record, therefore, it is unbelievable that the assessing officer had any material or has reason to believe that income chargeable to tax has escaped assessment. The same facts and the statement of Smt. Savitri Devi were considered by ITAT Amritsar Special Bench in the case of Assam Tea Co. (supra) and such statement was not found to be reliable to justify the initiation of the reassessment proceedings. The decision in the case of Phool Chand Bajrang Lal (supra) is also considered by the Special Bench earlier. The decision of ITAT Amritsar Bench in the case of Gopi Chand Prem Kumar (supra) relied upon by the learned Departmental Representative is not applicable in view of the order of the Special Bench of ITAT in the case of Assam Tea Co. (supra). In the case of Sachdeva & Sons (supra), the initiation of reassessment proceedings was held to be justified by ITAT Amritsar Bench because specific material was available in the form of incriminating evidence recovered by the Enforcement Directorate. This case is, therefore, clearly distinguishable on facts.
13. In the present cases, the information collected by the department after completion of the assessment is not specific, reliable and relevant. Any general information contained in the letter of the ACIT, Inv. Circle, in our opinion, is not relevant material to sustain the initiation of reassessment proceedings. Learned Departmental Representative referred to the letter of the assessee which was in nature of distinguishing the case of assessee. Learned Representative also placed copy of the reasons for issue of notice under section 148 in both the assessment years in the case of Durga Prashad Goyal in which the assessing officer has referred to the search conducted at the residence of Shri Purshotam Dass mentioned above and further mentioned that the assessee has not filed income tax return for the assessment years 1982-83 and 1983-84. He, therefore, on such facts stated to have reasons to believe that by reasons of omission for failure on part of the assessee to make a return under section 139 for both the assessment years, the income chargeable to tax as escaped assessment of these years. Copy of ITNS -10 is also filed in which in column No. 8 it is stated by the assessing officer that assessment is proposed to be framed for the first time. These facts clearly show that assessing officer was not justified in reopening the assessment in the matter because he has recorded facts contrary to record in the assessment order, assessing officer mentioned that original assessment for both the years were made under section 143(1) vide orders dated 30-6-1988 and 30-11-1983 respectively which show returns are in fact filed. The reasons recorded by the assessing officer for forming his belief for reopening assessment under section 147 are not based on any material or fact, therefore, same are incorrect and does not exist. The belief of assessing officer for initiating proceedings under section 147 has no rational connection with reasons. The assessing officer has not mentioned in the reasons for issue of notice under section 148 that he has reasons to believe that assessee has failed to disclose fully and truly all material facts necessary for that year. Since no statement of Purshotam Dass is recorded and no report or material is filed on record as suggested by learned Departmental Representative we are of the opinion that the assessing officer merely acted on suspicion and assumption that income chargeable to tax has escaped assessment. ACIT Investigation Circle has merely passed on general information to the assessing officer about name lending racket by Parshotam Dass & Associates and such information coming to the assessing officer is neither specific, nor reliable and not relevant against the assessee because it has no basis whatsoever. Therefore, such information given to the assessing officer would not in any manner prove that what was disclosed by the assessee in return filed with revenue department earlier was not true and correct. The belief is of assessing officer who initiated the reassessment proceedings and not of Assistant Commissioner of Income Tax Investigation Circle. It only shows that assessing officer has initiated reassessment proceedings without application of mind. There is no material with the department to justify the initiation of the reassessment proceedings in the cases under appeal, which in our considered opinion is not fit case to sustain the reassessment. On consideration of the above facts, we are of the view that assessing officer did not validly assumed jurisdiction in initiating proceedings under section 147 of the Income Tax Act. Considering the above discussion and relying on earlier order of ITAT Amritsar Special Bench in case of Assam Tea Co. (supra), we are of the view that cases of assessees are squarely covered by order of Special Bench in case of Assam Tea Co. (supra) therefore, initiation of the reassessment proceedings are not in accordance with law. We, accordingly, quash the same. We, therefore, answer the first question in negative, i.e., in favour of the assessee and against the revenue. Since question No. 1 is decided in favour of the assessee, therefore, there is no need to decide question No. 2 on merits as it is of academic interest only.
14. No other point is argued or pressed nor there is any need to go in those points in view of our above finding.
15. As a result, we cancel the orders of the authorities below and allow all the appeals of the assessee.