(1.) HAVING heard counsel for the Department and the assessee we are satisfied that this rule must be discharged. We would state our reasons somewhat fully not only because the rule was argued at
considerable length and because the name of a reputed singer is involved but because the name
and reputation of a solicitor who has been disbelieved is involved.
(2.) THE assessee, Lata Mangeshkar, is a well -known playback singer and as such connected with the film world. On 23rd August, 1960, she purchased a flat in "Prabhu Kunj "at Peddar Road in Bombay
for a sum of Rs. 45,000. She had another flat at Walkeshwar in Bombay, which she sold off on
12th October, 1960, to one Vasantrai Prabhudas Jobanputra. While enquiring into the purchase and sale the ITO found entries pertaining to a sum of Rs. 95,000 in the books of the assessee. A sum of
Rs. 95,000 was alleged to have been borrowed by her on hundi loans. The ITO called upon her to
explain these alleged loans. In answer to that requisition the assessee filed her account books.
They appear at Exhibit "B "in which there appear entries of borrowings from as many as ten
different persons said to be financiers or bankers of hundi loans.
The ITO decided to check these alleged borrowings. Therefore, he summoned the 10 persons named, under S. 131 of the IT Act, but when the summonses were sent by registered post they
were returned with the remark "Not claimed "even though they were directed to the addresses
given by the assessee herself, except in one case, namely, of the financier Shamdas Amarchand.
This alleged financier, however, failed to appear before the ITO in response to the summons as
required. The ITO put these facts on record by his letter dated 2nd February, 1963 (part of Exhibit
"C " collectively) and required the assessee to produce those financiers. This was the first phase in
all these transactions that took place in this case. Until this letter was received the assessee had
only filed an account which disclosed that the transactions of borrowings were from the 10 parties
in Exhibit "B ", but she had not informed the ITO that the transactions were put through by her
solicitors, M/s Thakoredas & Co., whose sole proprietor is one Shantikumar Gandhi. Till the date of
the letter, dated 2nd February, 1963, also the assessee did not inform the ITO that she did not
know any one of the financiers whose names were mentioned in her account, Exhibit "B ".
In reply to the ITO's letter, dated 2nd February, 1963, the assessee's chartered accountants wrote
to the ITO on 4th March, 1963, and for the first time disclosed :
". . . We have been asked to confirm that these loans were taken by our client through M/s Thakoredas and Co. (partner - Shantikumar R. Gandhi), 8 Nanabhai Lane, Fort, Bombay -1. These loans were taken on two occasions being Rs. 45,000 on or about the 23rd August, 1960, in the name of our client's mother, Smt. Dinanath Mangeshkar . . .
(3.) AS regards the other loan of Rs. 50,000 the same was also raised by our client through her solicitors, the said Thakoredas & Co., on or about 10th January, 1961, that is to say, the amount
was received by her from her solicitors directly and not from hundi brokers or financiers. This loan
of Rs. 50,000 was repaid by our client on 7th October, 1961, by paying Rs. 20,000 from our client's
own receipts and raising loans of Rs. 30,000 from M. M. Khandwala of Thana through her solicitors,
M/s Thakoredas & Co. ";