K.L.Roy, J. - (1.) This application appears to be an offshoot of the alleged all India spurious hundi racket unearthed by the income-tax department. By this application the petitioner impugns a notice issued under Section 148 of the Income-tax Act, 1961, for reassessment of the petitioner's income for the assessment year 1960-61.
(2.) For the said assessment year, for which the petitioner's accounting year was the financial year ending on the 31st March, 1960, he was assessed under Section 23(3) of the Income-tax Act, 1922, on a total income of Rs. 24,469, by Sri A. K. Chanda, the Income-tax Officer, "J" Ward VI, Calcutta, on 23rd October, 1962. In making the said assessment the Income-tax Officer allowed the petitioner's claim for deduction of a sum of Rs. 35,236, alleged to have been paid as interest on loans on hundis. A further claim for a credit of Rs. 20,157, on sale of old gold appearing in the petitioner's profit and loss account was disallowed, as the Income-tax Officer did not accept the sale of gold. It appears that at the time of the original assessment the petitioner had submitted to the Income-tax Officer the relevant balance-sheet and profit and loss account and also a list of the creditors to whom interest had been paid during the accounting year showing the amounts of such interest and a copy of the complete loan account of the various creditors, 65 in number, appearing in his books of account. This is established by producing certified copies of the aforesaid documents from the records of the income-tax department. It is also claimed in the petition and not disputed in the affidavit-in-opposition that at the time of the assessment various confirmation letters from the lenders as well as some of the discharged hundis were produced before the Income-tax Officer A notice purported to be under Section 148 of the Income-tax Act, 1961, dated the 24th March. 1969, and issued by the Income-tax Officer, "E" Ward, Hundi Circle, Calcutta, the respondent No. 2, herein, was served on the petitioner on the 26th March, 1969, that as the said Income-tax Officer had reason to believe that the petitioner's income chargeable to tax for the assessment year 1960-61 had escaped assessment, it was proposed to reassess the income for the said year and that the petitioner was required to submit his return within thirty days from the date of the service of the notice. The notice further mentioned that it was being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal I. By his letter dated the 15th April, 1969, the petitioner contended that the respondent No. 2 had no material for his belief that the petitioner's income had escaped assessment and further required the respondent to furnish him with the materials on which the said reason to believe was based. The petitioner also filed his return for the assessment year 1960-61, in response to the aforesaid notice under protest. As there was no compliance with his aforesaid letter this application was moved and this rule obtained from this court on 17th April, 1969, requiring the respondents to show cause why the impugned notice and all proceedings taken thereunder should not be quashed.
(3.) The affidavit-in-opposition has been affirmed by one Santosh Kumar Banerjee, the present incumbent to the post of Income-tax Officer, "E", Hundi Circle, who had neither made the original assessment nor issued the impugned notice. His statements in the affidavit are necessarily based on the records of the assessment proceedings of the petitioner. The material on which the respondent No. 2 had reasons to believe that the petitioner's income for the assessment year 1960-61 had escaped assessment are stated in paragraph 7 of the said affidavit in the following terms: "I say that on subsequent investigation it was found that the alleged loans obtained by the petitioner on hundis were not genuine and some of the persons from which (?) the petitioner alleged to have obtained loans specifically admitted that they had been mere name-lenders for the purported loans which were entered in the books of accounts of various assessees including the petitioner on commission.";