Law:

Section:

Section 147(a) of the income-tax act, 1961-Reassessment-Non-disclosure of primary facts-Original assessments completed on 31-1-1971-Account books, subsequently seized in premises of a broker, revealed loans obtained were fictitious and interest payments actually made were less than amounts claimed-ITO initiated proceedings to reassess such fictitious loans and resultant interest as taxable income-Whether initiation of reassessment proceedings invalid and without jurisdiction-Held, on facts, no Facts For the assessment years 1969-1970 and 1970-71, the assessee filed returns along with certain documents in support thereof. It also furnished a list of 27 persons to whom the assessee paid interest. The assessment proceedings were completed for both the years on 3-1-1971. During the course of raid, on 25-9-1970, on the premises of H, a money broker at Ludhiana, certain secret records were taken into custody by the department. On the basis of these records, the ITO, Ludhiana, sent the information that the assessee-firm had introduced its own black money into the books of account during the financial years 1968-69 and 1969-70 in the guise of alleged loans from the specified parties. It was also detected that the amount of interest actually paid by the assessee in respect of these loans was much less than the amounts claimed by it in its books. The interest payment vouchers seized by the department mentioned the amount of interest actually claimed by the assessee in its books but the amount of interest actually paid found place in the seized diaries of the broker. These facts reflected that these loans were obviously havala loans and the lenders were merely name-lenders. The amounts of such loans for the financial year 1968-69 were Rs. 5,000 and the financial year 1969-70 were Rs. 44,000. On receipt of the above information, the ITO initiated reassessment proceedings under section 147 for the said two assessment years to assess the assessee's income, representing the said loans and the interest thereon, that had escaped assessment. He, accordingly, issued notices under section 148. On assessee challenging the notice in a writ as being without jurisdiction because the…

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