Law:

Section:

Section 147, read with section 148, of the Income-tax Act, 1961 - Income escaping assessment - Position prior to 1-4-1989 - Assessment year 1947-48 - Whether, in an application under article 226 of the Constitution of India challenging a notice under section 148, High Court is not concerned with sufficiency of reasons to re-open assessment, but is concerned, to find out whether there were some reasonable grounds for coming to belief that there had been non-disclosure of primary facts - Held, yes - Whether, therefore, where it was found that certain extensive investigations had been carried out before initiation of proceedings under section 147 and reasons recorded had been produced which had rational nexus, it could be concluded that there was sufficient material for re-opening of assessment under section 147 - Held, yes FACTS The assessee was a partner in a registered firm 'VC'. The firm had discontinued the business with effect from 1949-50. For the assessment year 1947-48, notice under section 148 was issued and it was claimed that such notice had been duly served upon the assessee. In the reasons recorded for issue of this notice the ITO had noted that the first assessment on the firm was for the assessment year 1947-48. It was made under section 34 of the Income-tax Act, 1922 (Old Act), on 26-3-1952. During course of subsequent investigation it, was found out that the assessee had obtained large credits from the Bank of Bikaner and the Punjab National Bank during the financial year 1946-47, against the security of fixed deposit in various names. In fact the position was, it was asserted in the said notice, the creditors of the firm were those persons in whose names the fixed deposits accounts amounting to Rs. 3,01,000 were credited in these two banks, and, therefore, the firm VC was liable for those credits and was liable to explain them. In the reasons it had been recorded that the assessee had operated a loan account with the Bank of Bikaner. All these loans were advanced by the Bank against the security of several fixed deposit accounts in different names, details of which had been given in the reasons recorded. It had been stated in the reasons that…

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