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Section 147 of Income-tax Act, 1961 - Income escaping assessment - Position prior to 1-4-1989 - Assessment year 1961-62 - Original assessment of assessee was completed accepting certain loans shown in account books as genuine - Subsequently a creditor made statement that he had been carrying on hawala business and that his loans to various parties, including assessee, were not genuine - whether re-opening of assessment proceedings on basis of statement made by creditor was valid - Held, yes FACTS A return was filed by the assessee under section 139 and assessment proceedings were completed after due investigation. Subsequently, it was found that in respect of certain loans shown in the accounts as genuine no adverse inference was drawn originally but the alleged creditor made a statement before the ITO long after the finalisation of the assessment that he had been carrying on hawala business and that his loans to various parties, including the assessee were not genuine. Therefore, proceedings under section 147(a) were initiated against the assessee. On writ : HELD In view of the decision of this Court in Kirpa Ram Ramji Dass v. ITO [1982] 135 ITR 68, it was to be held that it was open to the ITO to re-open the assessment under section 147(a) if he had reason to believe that the assessee had failed to disclose material facts necessary for assessment. The name of the assessee found mention in the statement of the creditor that the transactions entered into were bogus transactions and in fact no loan was advanced. It was, therefore, idle to contend that the ITO had no relevant material on the basis of which he could have reason to believe that the income in question had escaped assessment. This contention was therefore, without any merit. Accordingly, the writ petition was to be dismissed. Note : the decision was in favour of revenue. CASE REFERRED TO Kirpa Ram Ramji Dass v. ITO [1982] 135 ITR 68 (Punj. & Har.). JUDGMENT Dhillon, J.-In this writ petition under arts. 226 and 227 of the Constitution of India, the petitioner has challenged the notice issued by the ITO dated 30th January, 1970, copy of which is annex. D with the writ petition, on various grounds.…

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