Law:

Section:

Section 147(a) of the Income-tax Act, 1961 - Reassessment - Non-disclosure of primary facts - Assessment year 1962-63 - Assessee had shown in its books certain loans taken from various parties - These loans were accepted as genuine - Later, ITO having found that these loans were bogus and parties were mere namelenders, reopened assessment under section 147(a) - Whether reopening of assessment under section 147(a) was wrong in view of fact that subsequent information coming to ITO's possession regarding confessions of hundiwallas entitled him to take action under section 147(b - Held, yes FACTS For the assessment year 1962-63, the assessee-firm had disclosed in its books that it had taken certain loans from various parties. These loans were accepted as genuine. Subsequently, the ITO having found that these loans were bogus and these parties were acting merely as name-lenders, reopened the assessment under section 147(a) on the ground that these amounts had escaped assessment by reason of the assessee's failure to disclose fully or truly all material facts necessary for the assessment. The ITO accordingly held that these amounts represented the assessee's undisclosed income. On appeal, the AAC reversed the ITO's order on the ground that the later information which came to the ITO's possession regarding confession of the hundiwallas entitled him to take an action under section 147(b) and not under section 147(a) as there was no omission on the assessee's part to disclose material facts originally for its assessments. The Tribunal, however, restored the ITO's order and held that the source of receipt of the amounts appearing as credits in the assessee's books was a material fact for the assessment and if the assessee failed to make a full and true disclosure about the same, provisions of section 147(a) would be applicable. On reference: HELD The AAC considered the facts and circumstances of the case properly and applied the ratio of the decision of the Court in Seth Kirorimal Adwani v. ITO [1970] 77 ITR 789 (Assam & Nagaland). There was, therefore, no vice in the AAC's decision and the Tribunal was not correct in setting aside his order. CASE REVIEW ITO v.…

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