MEHTA, J. - (1.)THIS reference involves the interpretation and effect of the Finance (No. 2) Act of 1965 (Act No. 55 of 1965), which is hereinafter referred to as the Act, and arises out of the reassessment of the income of the applicant for the assessment year 1957 -58 (S. Y. 2021) on the ground that an undisclosed income of Rs. 90,000 has escaped assessment during the course of the original assessment, which was made on 24th October, 1961, on the total income of Rs. 43,219.
(2.)THE facts of the case are that the assessee deals in precious stones like rubies, sapphires, etc., which are mainly sold to foreign countries. During the course of the assessment of the petitioner's income for the assessment year 1961 -62 (S. Y. 2016) his accounts were scrutinised by the concerned Income -tax Officer with a view to see how his business was financed. During the said scrutiny it was noticed that the business was financed by money introduced in the form of hundi loans. It was further revealed that during the assessment year 1957 -58, the petitioner introduced the amount of Rs. 90,000 in the form of hundi loans from 20 Multani brokers of Bombay. These Multani brokers admitted that they had not advanced any amounts to the petitioner and that they were mostly name -lenders.
The record of the case reveals that on 3rd January, 1966, the concerned Income -tax Officer informed the petitioner by his letter, annexure 'B', that investigation of his case had revealed that he was borrowing hundi loans since long and, therefore, he should show cause why assessments of his income right from the assessment year 1957 -58 should not be reopened.

(3.)FOR more than three months the petitioners gave no reply to this notice but some developments took place during this interval which should be stated at this stage.
;