Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Illustrations - Assessment year 1989-90 - Whether where there was a substantial difference in figures of liabilities towards sundry creditors in party ledgers of assessee-firm and figures of liabilities towards sundry creditors in balance sheet of said firm, Assessing Officer might have a reason to believe that income had escaped so as to warrant initiation of action under section 147 - Held, yes Section 69, read with section 68, of the Income-tax Act, 1961 - Unexplained investments - Assessment year 1989-90 - Whether for applying provision of section 69, Assessing Officer must arrive at a finding based on relevant materials that assessee has actually made some unexplained investments - Held, yes - Whether where Assessing Officer made addition in respect of investment made by firm only on basis of different figures of assets and liabilities taken from balance sheet and party ledgers of firm and not on basis of any material or information that firm had in fact made investments, section 69 could not be applied to treat said investment as income of firm - Held, yes FACTS The assessee-firm was carrying on the business of sanitary stores and for the assessment year 1989-90, it filed a return disclosing a total income of Rs. 78,000. The return was not accompanied by balance sheet. On filing balance sheet, return was processed under section 143(1)(a) and intimation was sent raising a demand of only Rs. 48. Thereafter, a search and seizure operation was conducted in the premises of one of the partners of the said firm. A survey operation was also conducted in the business premises of the firm, during which certain party ledgers were seized and it was ascertained therefrom that only amount of Rs. 2,66,612.60 paise was in the account of the sundry creditors whereas in the balance sheet filed by the assessee a sum of Rs. 5,47,684.71 paise was shown in the account of the sundry creditors and a presumption was drawn by the Assessing Officer that the assessee had inflated the sundry creditors' account by Rs. 2,81,072.02 paise and thereby evaded tax liability on the aforesaid amount. Action for…

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