ORDER
S. Bandyopadhyay, Accountant Member
1. The only issue raised by the assessee in this appeal filed against the order of the CIT (A) relates to validity of the proceeding initiated by the Assessing Officer under Section I47(b).
2. The facts of the case may be described in a nut-shell as below : The assessment for the assessment year 1984-85 was completed under Section 143(3) on 16-9-1985. One Shri Balbir Prasad Mittal figured in the books of assessee as a creditor for a sum of Rs. 60,000 and the assessee credited Rs. 2,900 in his account by way of interest in the year under consideration. A search was conducted by the Intelligence Wing of Madras at the premises of Shri Balbir Prasad Mittal. The ADI, Madras communicated to the ITO the following :
M/s. Srinivasa Khandasari Udyog have utilised the file of Sri Balbir Prasad Mittal for recording a borrowal of Rs. 60,000 on 4-6-1983. A.D.D. for Rs. 60,000 was obtained on 4-6-1983 in favour of M/s. Srinivasa Khandasari Udyog. In the light of the pattern adopted in showing borrowals and advances by Sri Balbir Prasad Mittal the loans does not appear to be genuine. The amount has to be assessed as income.
The ITO reopened the assessment having regard to the communication of the ADI, Madras.
3. The learned counsel for the assessee had challenged the validity of the reopening proceeding even before the CIT (A). The CIT (A), however, did not agree with the contentions of the assessee and came to the conclusion that initiation of proceedings under Section 147(b) was valid in law. Ultimately, however, the CIT (A) set aside the re-assessment on a different ground.
4. Before us, the learned counsel for the assessee contends that there has been no recording of the reasons by the Assessing Officer for issuing the notice under Section 148 and at best there may be a reproduction of the intimation from the ADI, Madras. It is also contended that the Assessing Officer did not exercise his independent mind in initiating the reassessment proceeding and was simply dictated by the ADI in doing so. It is thus contended that the re-assessment proceeding is invalid. A number of decisions have been relied upon by the learned counsel for the assessee, to which we shall refer to at the relevant places.
5. The assessment records show that on 20-10-1986, the Assessing Officer recorded the following reasons on the order-sheet:
Please see page 2 of o/s. I have reason to believe that the assessee’s income chargeable to tax for the above assessment year has escaped assessment within the meaning of Section I47(a)/(b). Issue notice under Section 148.
Sd/-
ITO
At page 2 of the said order-sheet again, the following recording finds place:
20-6-1986. Please see extract filed. A sum of Rs. 60,000 received through Balbir Prasad Mittal is to be assessed as the income of the firm. Issue notice under Section 148 for 1984-85.
Sd/-
Assessing Officer
The extract as referred to above is the extract from the communication received by the Assessing Officer from the DDI, Madras which has been reproduced above.
6. The first citation relied upon by the learned counsel for the assessee is in the case of CIT v. Vyjayanthimata Bali[l985] 155ITR 662. In that case, the Bombay High Court had held that there was clear evidence that the action was initiated in pursuance of the directives of the Commissioner, which directives the ITO was obliged to follow and which directives could not be equated with information as contemplated under Section 147(6). In that particular case, the CIT had indeed issued a directive and not merely passed on information to the ITO to start the re-assessment proceedings. The facts of the present case are different from those of that case.
6(a). The next citation is in the case of Yeshwant Talkies v. CIT [1986] 157 ITR 103 (MP). In that case, what was decided is that the direction of the Commissioner or of the satisfaction of the Commissioner cannot be substituted in place of the satisfaction of the ITO on the basis of the information. In that particular case, the ITO even recorded that as directed by the CIT, he was satisfied that income had escaped assessment. Needless to say, the facts of the present case are completely different from those of this case also.
6(b). The other case of Jamna Lal Kabra v. ITO [1968] 69 ITR 461 (All.) on which the learned counsel for the assessee has placed reliance upon relates to initiation of proceedings under Section 147(a). The present case being in relation to a proceeding under Section 147(&) is different from that particular case.
6(c). In the case of T.M. Kousali v. Sixth ITO [1985] 155 ITR 739 (Kar.), it was decided that even though the ITO might have chosen to make the assessment under more stringent and onerous provisions of Section 147(a), there is nothing to prevent the appellate court from invoking the provisions of Section 147(b) provided the requisite conditions are satisfied and these are found on record. In another case of Vijayalakshmi Oil Industries v. ITO[1985] 155 ITR 748, also decided by the Karnataka High Court, it was held on the basis of the facts of the case that the notice could not be sustained either under Section 147(a) or even (&). In that case, the Department tried to argue that merely a note prepared even by the same ITO could not be considered as reasons recorded for the purpose of issue of notice under Section 148. In this particular case, we have seen above that the Assessing Officer actually recorded the reasons for initiating proceeding, although, may be in a cryptic manner.
6(d). The learned counsel for the assessee has also placed reliance on the decision of the Calcutta High Court in the case of H.A. Nanji & Co. v. ITO [1979] 120 ITR 593. Our attention has been drawn in this connection to the discussions made at page 606 of the said reported case in which the learned Judges expressed the view that there must be some grounds for the reasonable belief that there has been a non-disclosure or omission to file a true or correct return by the assessee resulting in escapement of assessment or in under-assessment. Such belief should again be in good faith, not a mere pretence or change of opinion on an inferential fact or facts extraneous or irrelevant to the issue but must have a rational connection or live link or relevant bearing on the formation of the belief. In that particular case, the assessee had claimed deductions from income for assessment year 1958-59 on account of interest paid on a number of Hundi loans which were accepted as genuine in the original assessment. Subsequently, the ITO received a circular from the Special Investigation Department, which gave a list of bogus Hundi creditors which included the alleged creditors of the assessee. The ITO initiated re-assessment proceedings and in the recorded reasons, referred to the circular setting out the names of Hundi creditors and the respective amounts involved which had not been examined in the course of the assessment. Thereafter, he referred to the list of bogus creditors and then stated that he had reasons to believe that the Hundi loans shown by the assessee were fictitious and income had escaped assessment. The High Court held that there were materials and reasons to clothe the ITO with jurisdiction under Section 147 and the proceedings were also considered to have legally and validly been initiated.
7. The learned DR, on the other hand, strongly contended that in the instant case, the Assessing Officer merely took into consideration the information passed on to him by DDI, Madras and acted on the same on the basis of his own discretion and was in no way dictated by the DDI, Madras. He thus contends that the re-assessment proceeding must be considered to be valid. He has relied on the decision of the Calcutta High Court in the case of Purushottam Das Bangur v. WTO[1984] 148 ITR 651. In the abovementioned case also, the ground for re-opening the wealth-tax assessment was that investigations had been made by the Special Cell of the Director of Inspection (Investigation) and a letter had been sent to the Commissioner, which was circulated amongst all ITOs and WTOs regarding the genuineness of the quotation of 925 ordinary shares of M Co. held by the assessee and it was found that M Co. was a part of the assessee group, that the shareholders of M Co. were mainly members of the assessee-family and that the shares were not freely dealt in the stock exchange, etc. The communication was found to have come in the usual course and the officers received the same in discharge of their official duties. The Calcutta High Court held that it could not be said that the information had been received from any doubtful source or was of such nature that the ITOs/WTOs could ignore it. It was thus held that a communication of this nature could be treated as information within the meaning of Section 17 of the Wealth-tax Act. The re-assessment proceeding was therefore considered as having validly been initiated.
8. In the instant case before us, there was merely a communication from DDI, Madras. Although it was stated therein that the amount of borrowal by the assessee from Shri Balbir Prasad Mittal was to be assessed as income, actually however, it indicated the doubtfulness of the credit-worthiness of Shri Balbir Prasad Mittal on examination of his assessment and other connected matters. On the basis of the said communication, the Assessing Officer exercised his discretion by applying his mind and initiated the re-assessment. The case, therefore, surely comes within the ambit of the decisions as HA. Nanji & Co. ‘s case (supra) and Purushottum Das Bangur’s case (supra) as referred to above. We are, therefore, of the opinion that the communication has rightly been considered by the CIT (A) to form “information” for the purpose of initiation of proceedings under Section 147(b). His action in considering the said, initiation to be valid is also being approved by us.
9. In the result, the appeal filed by the assessee is being dismissed.