Ajit K. Sengupta, J. - (1.) IN this reference under Section 256(1) of the INcome-tax Act, 1961, for the assessment year 1965-66, the following questions of law have been referred to this court : " 1. Whether, on the facts and in the circumstances of the case and having regard to the fact that, after completion of the original assessment, the INcome-tax Officer noticed the confessional statement of the loan creditor regarding the bogus jama kharch entry made in his books of account in respect of various loan transactions including the loans alleged to have been given to the assessee, the finding of the Tribunal that there was no live nexus leading to the formation of the belief that the income of the assessee escaped assessment because of the assessee's failure to disclose fully and truly all material facts is unreasonable and/or perverse? 2. Whether, on the facts and in the circumstances of the case and having regard to the fact of receipt of information in the form of the confessional statement of the loan creditor by the INcome-tax Officer after the completion of the original assessment, the Tribunal was justified in holding that the provisions of Section 147(b) have also no application to the facts of the case as it was only a change of opinion and, in that view, in upholding the orders of the Commissioner of INcome-tax (Appeals) ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the orders of the Commissioner of INcome-tax (Appeals) that the assumption of jurisdiction by the INcome-tax Officer to reopen the proceeding for the assessment year 1965-66 was not maintainable in law ?"
(2.) SHORTLY stated, the facts are that the original assessment on the assessee for the assessment year 1965-66 was completed on April 18, 1966. On May 6, 1977, the Income-tax Officer reopened the assessment with the following observations : " Information has been received to the effect that the assessee has introduced its concealed income in the form of loan from Nandkishore Lachminarain during the relevant accounting year. The assessee has failed to disclose his income fully and truly. This amounts to deliberate concealment on the part of the assessee. Issue notice under Section 148." During the course of the reassessment proceedings, the Income-tax Officer found other bogus cash credits and he made a total addition of Rs. 70,000 under the head "Other sources". Being aggrieved, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals) and challenged the jurisdiction of the Income-tax Officer to issue notice under Section 148. It was urged that, during the original assessment proceedings, the Income-tax Officer who made the assessment perused the primary facts disclosed by the assessee in terms of loans from Nandkishore Lachminarain of No. 25, Burtola Street, Calcutta. The said Income-tax Officer also issued summons under Section 131 of the Act to Messrs. Nandkishore Lachminarain for verification of the loans. At the original assessment stage, the assessee also filed a confirmed copy of accounts from Messrs. Nandkishore Lachminarain. The assessee submitted that the Income-tax Officer making the original assessment accepted the loans as genuine after making necessary enquiries. The assessee contended that the assessment proceeding was reopened on a mere change of opinion. The Commissioner of Income-tax (Appeals) accepted the contention of the assessee and observed that there was no live nexus leading to the formation of the belief that the income had escaped assessment for the assessment year 1965-66 because of the assessee's failure to disclose fully all material facts. The Commissioner of Income-tax (Appeals), therefore, held that the assumption of jurisdiction by the Income-tax Officer to reopen the proceedings for the assessment year 1965-66 was not maintainable in law. The Commissioner of Income-tax (Appeals), therefore, cancelled the reassessment.
(3.) BEING aggrieved, the Department preferred an appeal before the Tribunal. Although the details of the information leading to the reopening of the assessment were not recorded in the order-sheet, the Departmental Representative submitted that Shri Raghubir Saran Goel, proprietor of Messrs. Nandkishore Lachminarain, made a confessional statement before the Revenue authorities to the effect that bogus jama kharch entries were made in his books of account in respect of various loan transactions including the loan given to the assessee. The Departmental Representative submitted before the Tribunal that, in view of the receipt of the confessional statement made by the proprietor of Messrs. Nandkishore Lachminarain to the effect that bogus loan was allegedly given to the assessee, the Income-tax Officer had reason to believe that the income of the assessee had escaped assessment because of the assessee's failure to disclose fully and truly all material facts. The Tribunal, after considering the facts and circumstances of the case and considering the principles laid down by the several decisions cited before the Tribunal, held that the Income-tax Officer had no jurisdiction to initiate proceedings in this case. The initiation was made on a mere change of opinion.;