Law:

Section:

Section 147(a) of the income-tax act, 1961-Reassessment-Non-disclosure of primary facts-After completion of original assessment, ito noticed that certain amounts were advanced to assessee by a company p, in which assessee had a substantial interest and said company also had accumulated profits-ITO initiated proceedings under section 147(a) and treated accumulated profits of p as deemed dividends in assessee's hands-Balance sheet of assessee filed during original proceedings showed loan received from company p which carried on business in money-lending and whose records showed that it possessed accumulated profits-Whether there was no non-disclosure on part of assessee of primary facts and ito was not justified in initiating proceedings under section 147(a)-Held, on facts, yes Facts The assessee was assessed under section 143 for the assessment year 1967-68. Later on, the ITO noticed that a company, P, in which the assessee had a substantial interest, had advanced certain amounts to the assessee during the previous year relevant to the assessment year 1967-68 and that the said company had also certain accumulated profits as on 31-3-1967. The balance sheet of the assessee filed during the original proceedings disclosed a loan from P, which carried on business in money-lending. The ITO held that the said sum of accumulated profits should be included in the total income of the assessee as deemed dividend under section 2(22)( c) and that since this deemed dividend had not been disclosed by the assessee in the return of income filed by him, it had escaped assessment. He, therefore, initiated proceedings under section 147(a) and brought to charge the said sum of accumulated profits as deemed dividend. On appeal to the Commissioner (Appeals), the assessee contended that the loan taken was brought to the notice of the ITO even at the stage of the original assessment and that the advances made by the company to the assessee were in the normal course of business. The Commissioner (Appeals) held that section 147(a) was not applicable and cancelled the ITO's order. The Tribunal upheld the order of the Commissioner. (Appeals). On reference Held The Supreme Court has held in…

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