Law:

Section:

Section 148 of the Income-tax Act, 1961 - Reassessment - Issue of notice - Assessee snowed certain amounts credited to the names of certain persons - Confirmatory letters of creditors filed by assessee and duly considered by ITO and he treated credits as genuine - On information that creditors were merely name-lenders, ITO initiated reassessment proceedings - Whether there was good reason for initiating reassessment proceedings - Held, on facts, no FACTS In the relevant assessment year, the assessee had shown in his accounts certain amounts credited to the names of three persons. The confirmatory letters of creditors filed by the assessee were duly considered by the ITO and he treated the said credits to be genuine. Later on, it came to the notice of the ITO that the said creditors were merely name-lenders. On this information he issued notice under section 148 and initiated reassessment proceedings. During reassessment proceedings, two of the creditors appeared with account books but none appeared on behalf of the third one. However, the ITO did not believe the genuineness of the credits and added the entire amount in the returned income. The Tribunal held that as the ITO came to know from the cases of other parties that the creditors in question were merely name-lenders, he was justified in starting the reassessment proceedings and simply because the names of the creditors were brought to the notice of the ITO at the time of the original assessment proceedings and the particular of the creditors were given, it could not be said that the assessee had disclosed fully and truly all the material facts necessary for its assessments. On reference: HELD In ITO v. Lakhmani Mewal Dass [1977] 103ITR 437 ( SC) and Jai Singh v. CIT [1982] 136 ITR 895 (Punj. & Har.), on identical facts it was held that there was no reason for the assessing authority to believe that the assessee had failed to disclose fully and truly all the material facts necessary for the assessment. Therefore, the Tribunal was not right in holding that the reassessment proceedings initiated by the department were valid. CASE REVIEW ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) and Jai Singh v.…

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