Law: Income Tax Act, 1922

Section: 34(1)(a),66(2)

Section 147 of the Income-tax Act, 1961 (Corresponding section 34(1)(a) of the Indian Income-tax Act, 1922) - Income escaping assessment - Information - Position prior to 1-4-1989 - Assessment year 1948-49 - Whether if materials coming to knowledge of ITO or gathered by him subsequent to original assessment showed that statements made by assessee at stage of original assessment proceedings cannot be true or full, then he is entitled to initiate proceedings under section 34(1)(a) of 1922 Act notwithstanding fact that he has accepted statements of assessee made at stage of original assessment without further scrutiny - Held, yes - Whether where cash credits found in books of assessee company were proved to be advanced by creditor merely because source of earning of income by creditor was not proved by creditor such cash credit could not be treated as income of assessee in absence of material to connect that assessee advanced that amount to creditor and in turn creditor advanced same to assessee - Held, yes FACTS The assessee was a public limited company carrying on business in the manufacture and sale of yarn. In the accounts of the assessee for the relevant assessment year there were certain credits in the name of one T. In the course of the assessment proceedings the particulars about T. were called for and they had been duly furnished. The assessee had filed a return showing a business loss. The assessment was completed determining the net loss at lightly lesser amount. Subsequent to the completion of the assessment the ITO made some enquiries as to the status of T. The enquiries revealed that T was a man of little means and that he could not have advanced a heavy sum of Rs. 3,00,000 to the assessee. The ITO thereupon felt that the said cash credits in the name of T should really represent the undisclosed business profits of the assessee. He, therefore, initiated proceedings under section 34(1)(a) of the 1922 Act. The assessee objected to the reopening of the assessment on the ground that the credit in the name of T had been examined and accepted as genuine in the course of the original assessment proceedings and that the assessee having disclosed fully and…

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