M.M.Dutt, J. - (1.) In these three appeals, the revenue is the appellant and it has challenged the propriety of the judgment of A. K. Mookerjee J., making the rules nisi obtained by the respondent on its application under Article 226 of the Constitution, absolute.
(2.) The respondent challenged the legality of three notices issued by the ITO under Section 148 of the I.T. Act, 1961, relating to the assessment years 1959-60, 1960-61 and 1961-62. The ITO sought to reopen the proceedings for those years alleging that he had reasons to believe that the income of the respondent had escaped assessment due to the omission or failure on the part of the respondent to disclose fully and truly all material facts necessary for the assessment of its income for the relevant assessment years. The reasons that were recorded by the ITO are set out below: "In the course of assessment proceedings for 1962-63, it is found during the year of account the assessee introduced various cash credits in its books of accounts as hundi loans. It appears that in the course of original assessment proceedings no enquiries were made to verify the genuineness of these loans. It is now found that most of these creditors were not genuine lenders and as such I have reason to believe that the assessee's income from revenue sources escaped assessment owing to failure on its part to disclose fully and truly all material facts necessary for its assessment."
(3.) At the hearing of the rule, the revenue had produced before the learned judge the relevant records. It transpired from the records that on February 19, 1966, the IAC, Survey Range, issued a cyclostyled secret circular to all the ITOs mentioning therein the names of some persons and stating that those persons confessed that they had acted as name-lenders for bogus hundi transactions to help the parties who wanted to introduce their secret trade profit in their books in the form of bogus loans.;