Law: Income Tax Act, 1961

Section: 147,148,149

Income-tax----Reassessment---Scope of section 147(a), Indian Income Tax Act, 1961--Failure to disclose fully and truly material facts---Cash loan claimed to be taken by assessee from company---Accepted as genuine and original assessments made allowing interest thereon as deduction---Subsequent information from Officer Assessing Company that its Managing Director had confessed that company had not advanced any loan to any person during period covering date of cash loan---Subsequent information definite, specific and reliable---Notice for reassessment valid---Not mere change of opinion--¬Belief of ITO that income had escaped assessment---Sufficiency of reasons for forming the belief is not for the Court to Judge---Indian Income Tax Act, 1961, Ss.147(a), 148 & 149. For the assessment year 1963-64, the appellant firm at Azamgarh had claimed that it had borrowed a loan of Rs.50,000 from a Calcutta company on May 19, 1962, and an entry was made in that behalf in its books of account on May 25, 1962. The loan was stated to have been raised in cash and returned in cash in 1968; but the interest thereon was paid during the assessment years 1963-64 to 1968-69 by cheque or bank draft. The appellant was required to produce a copy of the account of the Calcutta company to support the loan transaction. The appellant also produced a confirmatory letter from the company. The Income Tax Officer completed the assessments for the assessment years 1963-64 to 1968-69 accepting the genuineness of the loan and allowing deduction of the interest. Thereafter, upon enquiry, the Income Tax Officer having jurisdiction to assess the Calcutta company informed the Income Tax Officer at Azamgarh by a letter dated July 7, 1970, that the Managing Director of that company had made a confession to the effect that the company was only a name-lender and had never advanced any loans to any person and this was accepted in the assessments of the company for the assessment years 1962-63 to 1964-65. After receipt of this letter the Income Tax Officer, Azamgarh, issued notices to the appellant for reassessment under section 147(a) of the Income Tax Act, 1961, on the ground that income had escaped…

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