Law:

Section:

Section 147(a) of the income-tax act, 1961 - Reassessment Non-disclosure of primary facts Original assessment reopened to include suspicious hundi loans but subsequently dropped after examination of hundi counterfoils - ITO subsequ- ently discovered definite material showing hundi loans as bogus Whether ITO entitled to reopen assessment second time Held, on facts, yes Facts The assessee was originally assessed for the assessment years 1959-60 on 16-11-1959. In the books, there were cash credits in the names of five Bombay parties aggregating Rs. 95,009. As the genuineness of these credits was suspected, the ITO reopened the assessment under section 147(a) which were subsequently dropped in September 1962 after the ITO satisfied himself about the correctness of the loans transactions in the light of his examination of the supporting hundi counterfoils. Thereafter, the ITO came across certain materials to show that the said hundi loans were bogus and, on that basis, again initiated the reassessment proceeding for the same assessment year 1959-60 under section 147(a) by a notice dated 4-12-1967. The assessee's representation to the Commissioner for quashing the reassessment proceedings was unsuccessful. On writ, the revenue averred in his counter affidavit (i ) that sometime in October 1963, September 1965 and December 1965, the search at various places and subsequent investigations by various Commissioners revealed that a number of hundi bankers of Bombay, Calcutta and Madras, including the aforesaid five alleged creditors were engaged in havalabusiness and helped the assessee in introducing their own secreted profits in their books in the guise of hundi loans; (ii) that the said five alleged creditors, inter alia, admitted in their deposition that all the loans shown against their names were bogus and they did not advance any loans from' their pockets; (iii) that it was also found that certain branches of Union Bank of India at Bombay, where the assessee discounted some of the hundies, were not authorised to discount hundies at all; and (iv) that the modus operandi of bogus hundi, thus collected, were circulated by the Commissioner to all the ITOs in their…

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