Law: Income Tax Ordinance, 1979

Section: 65,65,62,59,12(7)

Income-tax Ordinance (XXXI of 1979)---Ss. 65, 62, 59 & 12(7)--Self-assessment scheme--Immunity--Re-opening of assessment under S.65--Essentials--Whether on the pretext of non-declaring of any interest under S.12(7) of the Ordinance on the interest free loans advanced by the assessee company to its Directors, notice under S.65 could be issued--Non­ charging of interest under S.12(7) on the loans advanced to the Directors would not come within the ambit of concealment entitling the Income Tax Officer to re­open the assessment completed under S.59(1). Under Section 65 of the Ordinance the assessment as a whole can be reopened if definite information is available with the I.-T.O. regarding escaped assessment, under assessment and concealment of income. In the facts and circumstances of the present case no definite information or material was available with the I.-T.O. for under-assessment or escaped assessment. Even in the notice issued under section 62 of the Ordinance, the I-T.O. had neither pointed out any defect nor sought any explanation of the assessee on quantum of assessment. Immunity available to the assessee company from detailed scrutiny could not be withdrawn without establishing under assessment, escaped assessment or concealment of income. That being so, the only issue requiring determination is whether on the pretext of non-declaring of any interest under section 12 (7) of the Ordinance on the loans advanced to the Directors, notice under section 65 of the Ordinance could be issued. Admittedly the assessee company had obtained loans from Bank for the purposes of importing machinery required for modernising the company's business. This loan facility was partly availed by the assessee company much earlier than advancing of loan to its Directors. As per wealth statement interest free loan obtained by the Directors was invested in purchase of agricultural land. Loans received by the Directors were neither utilized in any business or profession nor channellised for investment in securities or shares. It is fully established that the Directors had not purchased Defence Saving Certificates or other securities out of the loan obtained from the company.…

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