SRI KRISHNA PVT. LTD. ETC.versusITO CALCUTTA AND ORS.

                    SRI KRISHNA PVT. LTD. ETC.                                A
                                v.
                     ITO CALCUTTA AND ORS.

                              JULY 16, 1996

         [B.P. JEEVANREDDY AND S.B. MAJMUDAR, JJ.]                            B

       Income Tax Act, 1961-Sections 147 and 148--Reopening of assess-
 ment-Scope of enqui1)~Duty of assessee to fully and uuely disclose all
 mate-rial facts-Non disc/osure--Creation of bogus entries of
 /oan.1~Reasonable b""uunds fur Income Tax Officer to issue notice u/s 148.   C
         In the return filed for the Assessment Year 1959-60, the assessee
  sho\ved certain hundi loans said to have been taken from a number of
  persons. The Assessment was made accepting the assessee's case. During
. the assessment proceedings for the succeeding year, 1960·61, the assessee
  again showed hundi loans of more than rupees seventeen lakhs. The D
  Income Tax Ollicer held that out of the hundi loans claimed, loans
  totalling Rs. 11,15,275 were not established to be genuine loans. He also
  found that many of them were bogus claims while some of the alleged
  lenders w·ere found to be near relations of directors or principal
  shareholders of the assessee. That amount was added as income from E
  undisclosed sources. Having regard to the similarity of the claims and the
  persons who were said to have advanced the said unsecured hundi loans
  during the Assessment Year 1959-60, the ITO issued a notice u/s 148
  calling upon the assessee to file a revised return for the Assessment year
  1959-60. The assessee filed a Writ petition in the High Court questioning
  the validity of the notice on the ground that the Income Tax Ollicer had F
  no reasonable ground to believe that income chargeable to tax had escaped
  ass_essment for that year on account of any omission or failure on his part
  to make a full and true disclosure of all material facts. The petition was
  allowed by a Single Judge of the High Court whose decision had been
  reversed in appeal by the Division Bench. This appeal by special leav.e had G
  been filed by the assessee against the judgment and order of the Division
  Bench of the High Court.

       Dismissing the appeal, this Court

       HELD : 1.1. The power conferred upon the Income tax Officer by         H
                                 627
    628                  SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A Sections 147 and 148 of the Income Tax Act is not an urbridled one. It is
    hedged in with several safeguards conceived in the interest of eliminating
    room for abuse of this power by the assessing officers. The idea was to
    save the assessees from harassment resulting form mechanical re-opening
    of assessment but this protection is available only to those assessees who
    disclose all material facts truely and fully. (633-D-E]
B
           1.2. In the reasons recorded by the Income Tax Officer {as required
    by Section 148(2), he had stated clearly that in the course of assessment
    proceedings for the succeeding assessment year, it was found that out of
    the unsecured hundi loans put forward by the assessee, a large number
C   were found to be bogus and that many of the so-called lenders were found
    to be near relations of the directors or the principal shareholders and that
    similar loans were also noticed for the Assessment year 1959-60 and
    therefore, he had reason to believe that there had been no true and full
    disclosure of all material facts by the assessee for the Assessment Year
D   1959-60 leading to escapement of income. It was not alleged by the asses see
    that the Income Tax Officer had not checked up or tallied the names of
    the alleged lenders for both the assessment years and that he merely went
    by the fact that there were unsecured handi loans for both the assessment
    years. In the absence of any such allegation • which allegation, if made,
    could have afforded an opportunity to the Income Tax Officer to answer
E   the said averment • it must be presumed that the Income Tax Officer did
    find that a large number of alleged lenders who were found to be bogus
    during the Assessment Year 1960-61 were also put forward as lenders
    during the Assessment year 1959-60 as well. Evidently, this was what he
    meant in the context, when he spoke of "similar loans" being noticed for
F   the year in question as well. In such a situation, it was impossible to say
    that the Income Tax Officer h;id no reasonable ground to believe that there
    had been no full and true discl 0sure of all material facts by the assessee
    during the relevant assessment year and that on that account, income
    chargeable to tax had escaped assessment. Every disclosure is not and
    cannot be treated to be a true and full disclosure. A disclosure may be a
G   false one or true one. It may a full disclosure or it may not be. A partial
    disclosure may very often be a misleading one. What is required is a fall
    and tmc dfsclosure of all material facts necessary for making assessment for
    that year. (634-G:H; 635-A-E]

H         1.3. Whether a loan, alleged to have been taken by the assessee is
        KRISHNA PVT. LTD. v. i.T.O. CALClJITA [JEEVAN REDDY, J.]       629

true or false, is a material fact - and not an inference, factual or legal, to A
be drawn from given facts. In this case, ten persons (who were alleged to
have advanced loans to the assessee in a total sum of Rs. 3,80,000 out of
the total hundi loans of Rs. 8,53,298) were established to be bogus persons
or mere name lenders in the assessment proceedings relating to the
subsequent assessment year. It did furnish a reasonable ground for the
                                                                               B
Income Tax Officer to believe that on account of the failure-indeed not a
mere failure but a positive design to mislead - of the assessee to disclose
all material facts, fully and truly, necessary for his assessment for that
year, income had escaped assessment. The enquiry at the stage of the
validity of the notice u/s 147/148 is only to see whether there are reasonable
grounds for the Income Tax Officer to believe and not whether the omis- C
sion/failure and the escapement of income is established. [638-B-D]

      Calcutta Discoullt Co. Ltd. v. Income Tax Officer, Companies Distlict-
I, Calcutta & Anr., (1961) 41 ITR 191; Phool Chand Bajranglal v. Income
Tax Officer, (1993) 203 ITR 456 and Central Provinces Manganese Ore Co. D
Ltd. v. Income Tax Officer, Nagpur, (1991) 191 ITR 662, relied on.

        Income Tax Officer v. Mewalal Dwarka Prasad, 176 ITR 529, distin-
guished.

        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1562 of               E
1977.

     From the Judgment and Order dated 5.4.76 of the Calcutta High
Court in A. No. 175 of 1972.

                       With                                                   F

        Civil Appeal Nos. 2101-03 of 1980.

     From the Judgment and Order dated 8.2.79 of the Calcutta High
Court in A. No. 278 of 1973.
                                                                             G
        Jaideep Gupta for Khaitan & Co. for the Appellants.

        B.B. Ahuja, B.S. Ahuja and S.N. Terdol for the Respondents.

        The Judgment of the Court was delivered by                           H
    630                    SUPREME COURT REPOR'fS (1996] SUPP. 3 S.CR.

A         B.P. JEEVAN REDDY, J. Civil Appeal No. 1562 of 1977:

          This is an appeal preferred by the assessee against the judgment and
    order of a Division Bench of the Calcutta High Court allowing the writ
    appeal preferred by the Revenue (Income Tax Officer, Central Circle-VI
B   and Others) against the judgment of a learned Single Judge. The learned
    Single Judge had allowed the writ petition filed by the assessee questioning
    the validity of a notice issued under Section 148 read with Section 147 of
    the Income Tax Act.

            In the return filed for the Assessment Year 1959-60, the assessee had
C   shown certain hundi loans totalling Rs. 8,53,298 said to have been taken
    from a number of persons. The Income Tax Officer accepted the averment
    and made the assessment. During the assessment proceedings for the
    succeeding year, 1960-61, the assessee again showed hundi loans in a sum
    of more than Rupees seventeen lakhs. The Income Tax Officer enquired
D   into the truth of the averment and found that many of them were bogus
    claims while some of the alleged lenders were found to be near relations
    of directors or principal shareholders of the assessee. The Income Tax
    Officer held that out of the hundi loans of more than Rupees seventeen
    lakhs claimed by the assessee, loans totalling Rs. 11,15,275 were not estab-
E   lished to be genuine loans and accordingly added that amount as income
    from undisclosed sources. Having regard to the similarity of the claims and
    the person who are said to have advanced the said unsecured hundi loans
    during the accounting year relevant to the Assessment Year 1959-60, the
    Income Tax Officer issued a notice under Section 148 calling upon the
    assessee to file a revised return for the Assessment Year 1959-60. Imme-
F   diately, upon receiving the said notice, the assessee approached the Cal-
    cutta High Court by way of a writ petition questioning the validity of the
    notice on the grounds that the Income Tax Officer had no reasonable
    ground to believe that income chargeable to tax has escaped assessment
    for the said year on account of any omission or failure on his part to make
G    a full and true disclosure of all material facts. The writ petition was allowed
     by a learned Single Judge, as stated above, whose decision has been
     reversed in appeal by the Division Bench. This Court entertained the
     Special Leave Petition filed by the assessee and granted leave on July 26,
     1977. This Court, however, did not stay the proceedings pursuant to the
H    impugned notice. It directed that the Income Tax Officer may proceed to
      KRISHNA PVT. LTD. v. I.T.0.CALCUTIA[JEEVANREDDY.J.J               631

complete the assessment proceedings but will not issue a demand notice.        A
The Income Tax Officer has accordingly completed the re-assessment.

      Sections 147, 148 and 151, as they stood at the relevant time, read as
follows :

        "147. Income escaping assessment. If (a) the Income-tax Officer        B
        has reason to believe that, by reason of the omission or failure on
        the part of an assessee to make a return under Section 139 for
        any assessment year lo the Income-tax Officer or to disclose fully
        and truly all material facts necessary for his assessment for that
        year, income chargeable to tax has escaped assessment for that         c
        year, or

        (b) notwithstanding that there has been no omission or failure as
        mentioned in clause (a) on the part of the assessec, the Income-tax
        Officer has in consequence of information in his possession reason
        to believe that income chargeable lo tax has escaped assessment        D
        for any assessment year,

        he may, subject to the provisions of sections 148 to 153, assess or
        re-assess such income or recompute the loss or the depreciation
        allowance, as the case may be, for the assessment year concerned       E
        (hereinafter in sections 148 to 153 referred to as the relevant
        assessment year).

        Expla11atio11-I. - For purposes of this section, the following shall
        also be deemed to be cases where income chargeable to tax has
        escaped assessment, namely :                                           F

        (a) where income chargeable to tax has been under- assessed; or

        (b) where such income has been assessed at too low a rate; or

        (c) where such income has been made the subject of excessive
                                                                               G
        relief under this Act or under the Indian Income-tax Act, 1922 (11
        of 1922); or

        (d) where excessive loss or depreciation allowance has been com-
        puted.                                                           H
    632                  SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A           Explanation-2. - Production before the Income Tax Officer of
            account books or other evidence from which material evidence
            could with due diligence have been discovered by the Income-tax
            Officer will not necessarily amount to disclosure within the mean-
            ing of this section.

B           148. Issue of notice where income has escaped assessment - (1)
            Before making the assessment, re-assessment or recomputation
            under section 147, the income-tax Officer shall serve on the asses-
            see a notice containing all or any of the requirements which may
            be included in a notice under sub-section (2) of section 139; and
c           the provisions of this Act shall, so far as m·ay be, apply accordingly
            as if the notice were a notice issued under that sub-section.

            (2) The Income-tax Officer shall, before issuing any notice under
            this Section, record his reasons for doing so.

D           151. Sanction for issue of notice. - (1) No notice shall be issued
            under section 148 after the expiry of eight years from the end of
            the relevant assessment year, unless the Board is satisfied on the
            reasons recorded by the Income-tax Officer that it is a fit case for
            the issue of such notice.
E           (2) No notice shall be issued under Section 148 after the expiry of
            four years from the end of the relevant assessment year, unless the
            Commissioner is satisfied on the reasons recorded by the Income-
            tax Officer that it is a fit case for the issue of such notice."

p          Section 139 places an obligation upon every person to furnish volun-
    tarily a return of his total income if such income during the previous year
    exceeded the maximum amount which is not chargeable to income tax. The
    obligation so placed involves the further obligation to disclose all material
    facts necessary for his assessment for that year fully and tntly. If at any
    subsequent point of time, it is found that either on account of an omission
G   or failure of the assessee to file the return or on account of his omission
    or failure to disclose fully and truly all material facts necessary for his
    assessment for that year, income chargeable to tax has escaped assessment
    for that year, the Income Tax Officer is entitled to re-open the assessment
    in accordance with the procedure prescribed by the Act. To be more
H   precise, he can issue the notice under Section 148 proposing to re-open
      KRISHNA PVT. LTD. v. J.T.O. CALCUlTA [JEEVAN REDDY, J.]            633

the assessment only where he has reason to believe that on account of A
either the omission or failure on the part of the assessee to file the return
or on account of the omission or failure on the part of the assessee to
disclose fully and truly all material facts necessary for his assessment for
that year, income has escaped assessment. The existence of the reason (s)
to believe is supposed to be the check, a limitation, upon his power to
                                                                              B
re-open the assessment. (See the leading decision on this subject in Baiium
Chemicals v. Company Law Board, [1966] Suppl. S.C.R. 311 at 361 =
A.LR. (1967) S.C. 295 at 324. Section 148(2) imposes a further check upon
the said power, viz., the requirement of recording of reasons for such
re-opening by the Income Tax Officer. Section 151 imposes yet another
check upon the said power, ;iz., the Commissioner or the Board, as the C
case may be, has to be satisfied, on the basis of the reasons recorded by
the Income Tax Officer, that it is a fit case for issuance of such a notice.
The power conferred upon the Income Tax Officer by Sections 147 and
148 is thus not an unbridled one. It is hedged in with several safeguards
conceived in the interest of eliminating room for abuse of this power by D
the asses.sing officers. The idea was to .save the asses.sees from harassment
resulting from mechanical re-opening of assessment but this protection
avails only those assessees who disclose all material facts truly and fully.

      Coming to the facts of this case, the reasons recorded by the Income
Tax Officer for re-opening the assessment for the year 1959-60 are to the       E
following effect:

        "In the course of the assessment proceeding for the assessment
        year 1960-61 investigation were made into the unsecured loans of
        Rs. 17,32,298 which was the position of the last day of the account-
        ing year relevant to the assessment year 1960-61. These investiga-      F
        tions disclosed that a large number of them were Bogus Hundi
        Loans or Loans from near relations of the Directors or principal
        shareholders. Hence, the amounts credited to some of these ac-
        counts have been assessed as income from undisclosed sources to
        the extent of Rs. 11,51,275.00.                                         G
        Similar loans are noticed for the assessment year 1959- 60 and they
        stand at Rs. 8,53,298 as per Balance Sheet as on 16th April, 1959.

        I have, therefore reasons to believe that by reason of omission or
        failure on the part of the assessee company to disclose iully and H
     634                   SUPREME COURT REPORTS (1996] SUPP. 3 S.C.R.

A             truly all material facts necessary for its assessment of 1959-60 in
              regard to these accounts, income chargeable to lax has escaped
              assess1nent.

              I, therefore, propose action under Section 147(a) of I.T. Act, 1961"

B         We may also mention that after hearing this appeal for some time,
     we found it appropriate to look into the relevant record and accordingly
     made the following order on October 10, 1995:

             "After hearing the appeals for some time, we find it necessary to
             look into the record to satisfy ourselves with respect to the follow-
c            ing fact:

                   Whether, at the time of issuing of notice under Section 148,
                   the I.T.O. had material before him showing the persons who
                   have lent the sum of Rs. 8,53,298 during the accounting year
D                  relevant to assessment year 1959-60, were the Yery same
                   persons who are said to have lent Rs. 11,51,275 (bogus loans)
                   during the accounting year relevant to assessment year 1960-
                   61, and disallowed by the l.T.O. in that assessment year?

           Adjourned for eight weeks."
E
            Accordingly, the Income Tax Officer has submitted a chart showing
     that out of the unsecured hundi loans of Rs. 8,53,298 claimed by the
     assessee, ten persons who a.re said to have lent a total amount of Rs.
     3,80,000 were common to both the Assessment Years 1959-60 and 1960-61.
     In other words, these very ten persons are said to have advanced loans
F    again during the next year and all the ten were found to be bogus lenders
     as recorded in the assessment proceedings relating to Assessment Year
     1960-61. Now, the question is can it be said in the above facts that the
     issuance of the notice under Section 148 was not warranted? Can it be said
     in the face of the above facts that the Income Tax Officer had no reason
·G   to believe that on account of the assessee's omission/failure to disclose fully
     and truly all material facts necessary for his assessment for that year,
     income chargeable to tax has escaped assessment for that year. In the
     reasons recorded by the Income Tax Officer [as required by Section
     148(2) ], he had stated clearly that in the course of assessment proceedings .
     for the succeeding assessment year, it was found that out of the unsecured
H    hundi loans put forward by the assessee, a large number were found to be
      KRISHNA PVL LTD. v. 1.T.O. CALCUTTA [.TEEVAN REDDY,.!.]           635

bogus and that many of the so-called lenders were found to be near A
relations of the Directors or the principal shareholders. He stated that
similar loans are also noticed for the Assessment year 1959-60 and, there-
fore, he has reason to believe that there has been no true and full disclosure
of all material facts by the assessee for the Assessment Year 1959-60
leading to escapement of income. It is not alleged by the assessee that the
Income T<IX Officer had not checked up or tallied the names of the alleged B
lenders for both the assessment years and that he merely went by the fact
that there were unsecured hundi loans for both the assessment years. In
the absence of any such allegation - which allegation, if made, could have
afforded an opportunity to the Income Tax Officer to answer the said
averment - we must presume that the Income Tax Officer did find that a
large number of alleged lenders who were found to be bogus during the
                                                                               c
Assessment Year 1960-61 were also put forward as lenders during the
Assessment Year 1959-60 as well. Evidently, this is what he meant in the
context, when he spoke of "similar loans" being noticed for the year .in
qnestion as well. In such a situation, it is impossible to say that the Income
T<IX Officer had no reasonable ground to believe that there has been no D
full and true disclosure of all material facts by the assessee during the
relevant assessment year and that on that account, income chargeable to
tax had escaped assessment. As we shall emphasise hereinafter, every
disclosure is not and cannot be treated to be a true and full disclosure. A
disclosure may be a false one or true one. It may be a full disclosnre. or it
may not be. A partial disclosure may very often be a misleading one. What E
is required is a full and tnie disclosure of all material facts necessary for
maki11g assessment for that year. This calls for an examination of the
decisions of this Court analysing and elucidating Sections 147 and 148 of
the Act.
                                                                               F
     The first and foremost is the decision of the Constitution Bench in
Calcutta Discount Co. Ltd. v J11co111e Tax Officer, Compa11ies Dist1ict-I,
Calcutta & A11r., (1961) 411.T.R. 191. The case arose under Section 34 of
the Income Tax Act (as amended in 1951). In material particulars, the
provisions in Section 34 were similar to those in Section 147. Having regard
to the fact that it is the only Constitution Bench decision on the point, it   G
is necessary to examine it in some detail. The Constitution Bench explained
the purport of Section 34 in the following words:

        "To confer jurisdiction under this section to issue noti_ce in respe_ct
        of assessments beyond the period of four years, but within a period H
    636                 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A         of eight years, from the end of the relevant year_ two conditions
          have therefore to be satisfied. The first is that the Income-tax
          Officer must have reason to believe that income, profits or gains
          chargeable to income-tax have been under-assessed. The second
          is that he must have also reason to believe that such 'under-
          aesessment' has occurred by reason of either (i) omission or failure
B
          on the part of an assessee to make a return of his income under
          section 22, or (ii) omission or failure on the part of an assessee to
          disclose fully and truly all material facts necessary for his assess-
          ment for that year. Both these conditions are conditions precedent
          to be satisfied before the Income-tax Officer could have jwisdiction
c         to issue a notice for the assessnient or reassess1nent beyond the
          period of four years, but within the period of eight years, from the
          end of the year in question ......... The words used are 'omission or
          failure to disclose fully and truly all material facts necessary for
          his assessment for that year.' It postulates a duty on every assessee
          to disclose fully and truly all material facts necessary for his assess-
D
          nzent. What facts are material and necessary for assessment will
          differ from case to case. In every assessment proceeding, the
          assessing authority will, for the purpose of computing or determin-
          ing the proper tax due from an assessee, require to know all the
          facts which help him in coming to the correct conclusion. From
E         the primary facts in his possession, whether on disclosure by the
          assessee, or discovered by him on the basis of the facts disclosed,
          or otherwise, the assessing authority has to draw inferences as
          regards certain other facts; and ultimately, from the primary facts
          and.the further facts inferred from them, the authority has to draw
F         the proper legal inferences, and ascertain on a correct interpreta-
          tion of the taxing enactment, the proper tax leviable. Thus when a
          question arises whether certain income received by an assessee is
          capital receipt, or revenue receipt, the assessing authority has to
          find out what primary facts have been proved, what other facts can
          be inferred from them, and, taking all these together, to decide
G         what the legal inference should be ........ We have, therefore, come
          to the conclusion that while the duty of the assessee is to disclose
          fully and truly all primary relevant facts, it does not extend beyond
          this."
                                                             (Emphasis added)
H
            KRISHNA PVT.LTD. v. l.T.O. CALClITTA [JEEVAN REDDY, J.]             637

              Jn that case, the alleged non-disclosure of material facts fully and A
       truly - to put it in the words of the court-was the failure of the assessee
       to disclose "the true intention behind the sale of the shares". The assessee
       had stated during the assessment proceedings that the sale of shares during
       the relevant assessment years was a casual transaction in the nature of mere
       change of investment. The Income Tax Officer found later that those sales B
       were really in the nature of trading transactions. The case of the Revenue
       was that the assessee ought to have stated that they were trading transac-
       tions and that his assertion that they were casual transactions, in the nature
       of change of investment, amounted to "omission or failure to disclose fully
       and truly all material facts necessary for his assessment for that year" within
       the meaning of Section 34. This contention of the Revenue was rejected c
       holding that the true nature of transaction, being a matter capable of
       different opinions, is not a material or primary fact but a matter of
       inference and hence, it cannot be said that there was an omission or failure
       of the nature contemplated by Section 34 on the part of the assessee. Now,
      what needs to be emphasised is that the obligation .on the assessee to D
       disclose the material facts - or what are called; primary facts - is not a mere
       disclosure but a disclosure which is full and true; A false disclosure is not
       a true disclosure. The disclosure must not only be true but must be full -
       "Fully and truly". A false assertion, or statement, of material fact, therefore,
      attracts the jurisdiction of the Income Tax Officer under Section 34/147. E
      Take this very case: the Income Tax Officer says that on the basis of
      investigations and enquiries made during the assessment proceedings relat -
      ing to the subsequent assessment year, he has come into possession of
      material, on the basis of which, he has reasons to believe that the assessee
...   had put forward certain bogus and false unsecured hundi loans said to have
1[
      been taken by him from non-existent persons or his dummies, as the case
                                                                                        F
      may be, and that on that account income chargeable to tax has escaped
      assessment. According to him, this was a false assertion to the knowledge
      of the assessee. The Income Tax Officer says that during the assessment
      relating to subsequent assessment year, similar loans (from some of these
      very persons) were found to be bogus. On that basis, he seeks to re-open G
      the assessment. It is necessary to remember that we are at the stage of
      re-opening only. The question is whether, in the above circumstances, the
      assessee can say, with any justification, that he had fult'.Y and truly disclosed
      the material facts necessary for his assessment for that year. Having created
      and recorded bogus entries of loans, with what face can the assessee say H
    638                    SUPREME COURT REPORTS (1996] SUPP. 3 S.C.R.

A that he had truly and fully disclosed all material facts necessary for his
  assessment for that year. True it is that Income Tax Officer could have
  investigated the truth of the said assertion - which he actually did in the
  subsequent assessment year - but that does not relieve the assessee of his
  obligation, placed upon him by the statute, to disclose fully and truly all
B material facts. Indubitably, whether a loan, alleged to have been taken by
  the assessee, is true or false, is a material fact - and not an inference, factual
  or legal, to be drawn from given facts. In this case, it is shown to us that
  ten persons (who are alleged to have advanced loans to the assessee in a
  total sum of Rs. 3,80,000 out of the total hundi loans of Rs. 8,53,298) were
  established to be bogus persons or mere name lenders in the assessment
C proceedings relating to the subsequent assessment year. Does it not furnish
  a reasonable ground for the Income Tax Officer to believe that on account
  of the failure - indeed not a mere failure but a positive design to mislead
  - of the assessee to disclose all material facts, fully and truly, necessary for
  his assessment for that year, income has escaped assessment? We are of
D the firm opinion that it does. It is necessary to reiterate that we are now
  at the stage of the validity of the notice under Section 148/147. The enquiry
  at this stage is only to see whether there are reasonable grounds for the
  Income Tax Officer to believe and not whether the omission/failure and
  the escapement of income is established. It is necessary to keep this
  distinction in mind.
E
        A recent decision of this Court in Phoo/ Chand Bajrangla/ v. Income
  Tax Officer, (1993] 203 I.T.R. 456, we are gratified to note, adopts an
  identical view of law and we are in respectful agreement with it. The
  decision rightly emphasises the obligation of the assessee to disclose all
F material facts necessary for making his assessment fttl(y and t1U/y. A false
  disclosure, it is held, does not satisfy the said requirement. We are also in
  respectful agreement with the following holding in the said decision :

             "Since the belief is that of the Income-tax Officer, the sufficiency
             of reasons for forming the belief is not for the court of judge but
G            it is open to an assessee to establish that there in fact existed no
             belief or that the belief was not at all a bona fide one or was based
             on vague, irrelevant and non- specific information. To that limited
             extent, the court may look into the conclusion arrived at by the
             Income-tax Officer and examine whether there was any material
H            available on the record from which the requisite belief could be
      KRISHNA PVT. lffD. v. l.T.0.CAl.CUTTA[JEEVANREDDY,J.]                639

         formed by the Income-tax Officer and further whether that               A
         material had aoy rational connection or a live link for the formation
         of the requisite belief."

             Learned counsel for the assessee, Sri Gupta placed strong
         reliance upon the decisions of this Court in Chhugamal Rajpal v.         B
         S.P. Chaliha & Ors., (1971) 79 l.T.R. 603, Income Tax Officer, I
         Ward, Dist. VI. Calcutta v. Laklunani Mewal Das, (1976) 1031.T.R.
         437 and Commissioner of Income Tax, Calcutta v. Bur/op Dealers
         Limited, (1971) 79 l.T.R. 609 as laying down propositions contrary
         to those laid down in Phool Chand Bajranglal. We cannot agree.
         The principle is well-settled by Calcutta Discount and it is not         C
         reasonable to suggest that any different proposition was sought to
         be enunciated in the said decisions. Calcutta Discount emphasises
         repeatedly the assessee's obligation to disclose all material facts
         necessary for his assessment fully and truly in the context of the
         two requirements - called conditions precedent which must be
         satisfied before the Income Tax Officer gets the jurisdiction to        D
         re-open the assessment under Section 147/148. This obligation can
         neither be ignored nor watered down. Nor can aoyone suggest that
         a false disclosure satisfied the requirement of full and true dis-
         closure. All the requirements stipulated by section 147 must be
         given due and equal weight. Finality of proceedings is certainly         E
         consideration but that avails one who has fully and trul~ disclosed
         all material facts necessary for his assessment for that year - and
         not to others. All the decisions relied upon by Sri Gupta have been
         elaborately discussed and distinguished in Phool Chand Bajranglal
         and we fully agree with the same. We think it unnecessary to repeat
         those reasons. In particular, we agree with the reasons given in         F
         Plwo/ Chand Bajrangla/ for holding that the decision of this Court
         in Bur/op Dealers must be confined to the particular fact-situation
         of that case and that it cannot be construed to be of universal
         application irrespective of the facts and circumstances of the case
         before the Court.
                                                                                 G
       It is brought to our notice that certain other decisions of this Court have
rightly emphasised the requirement of full and true disclosure and have
held that failure or omission to do go, legitimately attracts ihe power under
Section 147. In Inspecting Assistant Commissioner of Income Tax v. V.l.P.
Industries Limited, [(1991) 1911.T.R. 661, a three-judge had this to say:          H
    640                  SUPREME COURTREPORfS [1996] SUPP.. 3 S.C.R.

A           "After hearing learned counsel for both the parties, we are unable
            to uphold that order of the High Court. It appears that, sub-
            sequently, facts have come to the notice of the Income- tax Depart-
            ment that the facts disclosed in the return are not a true and
            correct declaration of facts. In that view of the matter, we set aside
            the order of the High Court passed in Writ Petition No. 1634 of
B           1988 with Writ Petition No. 2919 of 1988 (V.I.P. lndust1ies v.
            Inspecting Assistant Commissioner, (1991) 187 !TR 639 (Bomb.),
            and send the case back on remand to the Income-tax Officer for
            a decision in accordance with law after giving an opportunity of
            hearing to the parties concerned.
c              The special leave petitions are disposed of."

         In Central Provinces Manganese Ore Co. Ltd. v. income Tax Ojjicc1;
    Nagpur, [1991] 191 I.T.R. 662 again, this Court observed:

            "The only question which arises for our consideration is as to
D
            whether the two conditions required to confer jurisdiction on the
            Income-tax Officer under ,,ection 147(a) of the Act have been
            satisfied in this case. The first is that the income-tax Officer must
            have reason to believe that the income chargeable to income-tax
            had been under-assessed and the second that such under-assess-
E           ment has occurred by reason of omission or failure on the part of
            the assessee to disclose fully and truly all material facts necessary
            for its assessment for the year 1953-54.

                So far as the first condition is concerned, the Income-tax
            Officer, in his recorded reasons, has relied upon the fact as found
F           by the Customs Authorities that the appellant had under- invoiced
            the goods it exported. It is no doubt correct that the said finding
            may not be binding upon the income-tax authorities but it can be
            a valid reason to believe that the chargeable income has been
            under-assessed. The final outcome of the proceedings is not
            relevant. What is relevant is the existence of reasons to make the
G
            Income-tax Officer believe that there has been under-assessment
            of the assessee's income for a particular year. We are satisfied that
            the first condition to invoke the jurisdiction of the Income-tax
            Officer under section 147(a) of the Act was satisfied,

H              As regards the second condition, the appellant did not produce
       KRISHNA PVT. LTD. v. l.T.O. CALClITTA[JEEVAN REDDY,.!.]           641

         the books of account kept by them at their head office in London A
         nor the original contracts of sale which were entered into at
         London with the buyer~. The appellant did not produce before the
         Income-tax Officer any of the 'accounts which' related to the
         foreign buyers. No reasons were given for the supply of manganese
         ore at a rate lower than the market rate. It is for the assef.see to
                                                                              B
         disclose all the primary facts before the Income-tax Officer to
         enable him to account for the true income of the assessee. The
         proven charge of under-invoicing per se satisfied the second con-
         dition. The appellant's assessable income has to be determined on
         the basis of the price received by it for the goods exported. If the
         true price has not been disclosed and there was under-invoicing, C
         the logical conclusion prima facie is that there has been failure on
         the part of the appellant to disclose fully and truly all material
         facts before the Income-tax Officer. We are, therefore, satisfied
         that both the conditions required to attract the provisions of
         section 147(a) have been complied with in this case."                D
       In ln~onie Tax Officer v. Me•valul Dwurka Prasad, 176 I.T.R. 529, this
 Court held that if the notice issued under Section 148 is good in respect
 of one item, it cannot be quashed under Article 226 on the ground that it
 may not be valid in respect of some other items. We need no~ however,
 dilate on this aspect for the reason that no argument has been urged before    E
 us to the effect that since the notice under Section 1.48 is found to be
 justifiable in respect of some loans disclosed and not with respect to other
-loans, it is invalid.

    For the above reasons, the appeal fails and is dismissed with costs.
Advocate's fee Rupees ten thousand consolidated.                                F

       Civil Appeal Nos. 2101-03 of 1980:

      No separate arguments have been addressed in these appeals ob-
viously because the decision in Civil Appeal No. 1562 of 1977 would govern      G
these cases as well. For the reasons given for dismissing Civil Appeal No.
1562 of 1977, these appeals are also dismissed.

       No costs.

R.A.                                                     Appeals dismissed.     H