I produced my books and a confirmation for the loan at the original assessment. The officer now says he has learnt the lender was a name lender. Can he reopen on that?
Yes. The Supreme Court dismissed the assessee's appeal and upheld the reopening. Where specific, reliable and relevant information comes into the officer's possession after the assessment, exposing the falsity of what the assessee said, that is not a change of opinion or a fresh inference from the same material - it is acting on fresh information. Producing books and a confirmation letter for a transaction later shown to be bogus is not a true and full disclosure. The officer's failure to investigate the doubt during the original assessment does not take away his jurisdiction. Burlop Dealers was confined to its own facts.
Decided by the Supreme Court (Supreme Court of India; judgment delivered by A.S. Anand, J) on 1993-07-13, reported as [1993] 203 ITR 456 (SC); AIR 1993 SC 2390; (1993) 4 SCC 77; JT 1993 (4) SC 291; 1993 (3) SCALE 180; [1993] Supp 1 SCR 28; (1993) 69 Taxman 627. It bears on section 147, section 148, section 149 of the Income Tax Act 1961, in Reassessment & Reopening and Cash Credits & Unexplained Money matters.
This is the case that resolved a long standing conflict among the High Courts on whether an assessee who has produced his books and documents can ever be reopened on later information, and it remains the standard statement of the line between fresh information and change of opinion. It draws that line with two propositions a practitioner needs. First, where the transaction itself is found on subsequent information to be bogus, the mere disclosure of it in the original proceedings is not a disclosure of true and full facts, so the second condition in section 147(a) is met. Second, the officer's ability to have investigated the matter earlier is irrelevant to his jurisdiction, following A.L.A. Firm. It also fixes the limits of judicial review: the sufficiency of the reasons is not for the court, but the assessee may show that no belief in fact existed, that it was not bona fide, or that it rested on vague, irrelevant or non-specific information, and the court may examine whether the material had a rational connection or live link with the belief. Mewal Das, on a vague confession that did not identify the period, is distinguished on exactly that footing.
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The appellant firm, assessed at Azamgarh, claimed in its return for assessment year 1963-64 to have borrowed Rs.50,000 in cash on 19 May 1962 from Jain Finance Distributors (India) Private Limited, Calcutta, an entry being made on 25 May 1962 in the books and the balance sheet. The loan was said to have been raised by a partner who had gone to Calcutta with a draft of Rs.31,000 and Rs.151 in cash to pay outstandings and buy cloth, and to have been repaid in cash in 1968, interest being paid by cheque or draft until then. During the assessment the officer called for the creditor's account and the assessee produced a confirmatory letter of 15 November 1963. Interest was allowed for 1963-64 to 1968-69. Doubting the transaction, the officer wrote on 19 May 1970 to the Income Tax Officer at Calcutta, who replied on 7 July 1970 that on the confession of the managing director, Tara Chand Surana, the company was a dummy concern which never advanced any loan, its business consisting entirely of name lending, and that this had been accepted in its assessments for 1962-63 to 1964-65. The officer issued a notice on 26 August 1971 proposing reopening under section 147(a), invited objections, obtained the Commissioner's sanction on 7 February 1972 and issued a notice under section 148. In the reassessment the assessee filed the creditor's affidavit; the creditor was produced, cross-examined by the officer and admitted his confession, and nothing was elicited on re-examination by the assessee's counsel. A show cause notice setting out all the material was not answered. The assessee moved the Allahabad High Court, which dismissed the writ petition on 24 November 1976 and granted a certificate because the High Courts were divided on the question.
The appeal was dismissed with no order as to costs. The Income Tax Officer at Azamgarh had rightly initiated reassessment on the basis of subsequent information which was specific, relevant and reliable, and after recording the reasons for his belief that the assessee had not disclosed the material facts truly and fully in the original proceedings. The two conditions for jurisdiction under section 147(a) read with sections 148 and 149 - reason to believe that income had escaped assessment, and reason to believe that the escapement was occasioned by the assessee's omission or failure to disclose fully and truly all material facts - must co-exist, and both were satisfied. Where the transaction is found on subsequent information to be bogus, disclosure of it at the original assessment is not disclosure of the true and full facts. The officer's failure to defer the assessment and investigate the genuineness of the loan does not take away his jurisdiction to act on information received later. Mewal Das was distinguished because the confession there was vague and did not fix the period; here the confession covered 1962-63 to 1964-65, the very period of the claimed loan. Burlop Dealers, where no fresh material at all had come from any external source, was confined to its facts, and the High Courts which read it as laying down a contrary rule fell into error. The Court gave the assessee six weeks to reply to the show cause notice, directed the officer to complete the reassessment expeditiously, and expressed no opinion on its merits.
The Court accepted that an assessee's duty is to disclose primary facts and that he need not tell the officer what inferences to draw, but held that the duty is to disclose them fully and truly. Once subsequent information shows that a disclosed transaction never happened, the disclosure was not true, and the second condition of section 147(a) is satisfied. From that the Court drew the distinction which is the ratio: acquiring fresh information, specific in nature and reliable in character, which exposes the falsity of the statement made at the original assessment, is a different thing from drawing a fresh inference from material that was already before the officer. The first is fresh information; the second is a change of opinion. Applying that, the letter of 7 July 1970 was specific in a way the material in Mewal Das was not, because it named the company, described the name lending business and identified the years, which matched the year of the claimed loan. Burlop Dealers was analysed at length: there the only new element was the officer's own view in a later year's assessment of the same assessee, which cannot by itself found a belief about an earlier year, and the observations there were made in that peculiar fact situation and are not of universal application. The Court then relied on T.S. Pl. P. Chidambaram, where a three judge bench held that the officer's failure to make further enquiry does not take the case out of section 34(1)(a) where the assessee has failed to place the material facts truly and fully, and on A.L.A. Firm, which held that information obtainable earlier by enquiry but not in fact obtained does not affect jurisdiction. Reviewing these, the Court set out the limits of review: since the belief is the officer's, the sufficiency of his reasons is not for the court, but the assessee may show that no belief existed, that it was not bona fide, or that it rested on vague, irrelevant or non-specific material, and to that extent the court may see whether the material had a rational connection or live link with the belief. Finally the Court identified the purpose of section 147 - to prevent a party who wilfully made a false statement from saying, once the falsity emerges, that the acceptance of his lie has tied the officer's hands.
it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information.
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Handle my notice → Ask a CA on WhatsAppYes. The Supreme Court dismissed the assessee's appeal and upheld the reopening. Where specific, reliable and relevant information comes into the officer's possession after the assessment, exposing the falsity of what the assessee said, that is not a change of opinion or a fresh inference from the same material - it is acting on fresh information. Producing books and a confirmation letter for a transaction later shown to be bogus is not a true and full disclosure. The officer's failure to investigate the doubt during the original assessment does not take away his jurisdiction. Burlop Dealers was confined to its own facts. This was decided by the Supreme Court (Supreme Court of India; judgment delivered by A.S. Anand, J) and bears on section 147, section 148, section 149 of the Income Tax Act 1961. It is reported as [1993] 203 ITR 456 (SC); AIR 1993 SC 2390; (1993) 4 SCC 77; JT 1993 (4) SC 291; 1993 (3) SCALE 180; [1993] Supp 1 SCR 28; (1993) 69 Taxman 627. This is the case that resolved a long standing conflict among the High Courts on whether an assessee who has produced his books and documents can ever be reopened on later information, and it remains the standard statement of the line between fresh information and change of opinion. It draws that line with two propositions a practitioner needs. First, where the transaction itself is found on subsequent information to be bogus, the mere disclosure of it in the original proceedings is not a disclosure of true and full facts, so the second condition in section 147(a) is met. Second, the officer's ability to have investigated the matter earlier is irrelevant to his jurisdiction, following A.L.A. Firm. It also fixes the limits of judicial review: the sufficiency of the reasons is not for the court, but the assessee may show that no belief in fact existed, that it was not bona fide, or that it rested on vague, irrelevant or non-specific information, and the court may examine whether the material had a rational connection or live link with the belief. Mewal Das, on a vague confession that did not identify the period, is distinguished on exactly that footing. If it applies to you, the first step is this: Attack the quality of the information rather than the officer's earlier inaction: show that it is vague, does not identify your transaction, your lender or the relevant period, or has no live link with the belief recorded.
The appellant firm, assessed at Azamgarh, claimed in its return for assessment year 1963-64 to have borrowed Rs.50,000 in cash on 19 May 1962 from Jain Finance Distributors (India) Private Limited, Calcutta, an entry being made on 25 May 1962 in the books and the balance sheet. The loan was said to have been raised by a partner who had gone to Calcutta with a draft of Rs.31,000 and Rs.151 in cash to pay outstandings and buy cloth, and to have been repaid in cash in 1968, interest being paid by cheque or draft until then. During the assessment the officer called for the creditor's account and the assessee produced a confirmatory letter of 15 November 1963. Interest was allowed for 1963-64 to 1968-69. Doubting the transaction, the officer wrote on 19 May 1970 to the Income Tax Officer at Calcutta, who replied on 7 July 1970 that on the confession of the managing director, Tara Chand Surana, the company was a dummy concern which never advanced any loan, its business consisting entirely of name lending, and that this had been accepted in its assessments for 1962-63 to 1964-65. The officer issued a notice on 26 August 1971 proposing reopening under section 147(a), invited objections, obtained the Commissioner's sanction on 7 February 1972 and issued a notice under section 148. In the reassessment the assessee filed the creditor's affidavit; the creditor was produced, cross-examined by the officer and admitted his confession, and nothing was elicited on re-examination by the assessee's counsel. A show cause notice setting out all the material was not answered. The assessee moved the Allahabad High Court, which dismissed the writ petition on 24 November 1976 and granted a certificate because the High Courts were divided on the question. The matter was decided on 1993-07-13 by the Supreme Court (Supreme Court of India; judgment delivered by A.S. Anand, J). On those facts the Supreme Court held as follows. The appeal was dismissed with no order as to costs. The Income Tax Officer at Azamgarh had rightly initiated reassessment on the basis of subsequent information which was specific, relevant and reliable, and after recording the reasons for his belief that the assessee had not disclosed the material facts truly and fully in the original proceedings. The two conditions for jurisdiction under section 147(a) read with sections 148 and 149 - reason to believe that income had escaped assessment, and reason to believe that the escapement was occasioned by the assessee's omission or failure to disclose fully and truly all material facts - must co-exist, and both were satisfied. Where the transaction is found on subsequent information to be bogus, disclosure of it at the original assessment is not disclosure of the true and full facts. The officer's failure to defer the assessment and investigate the genuineness of the loan does not take away his jurisdiction to act on information received later. Mewal Das was distinguished because the confession there was vague and did not fix the period; here the confession covered 1962-63 to 1964-65, the very period of the claimed loan. Burlop Dealers, where no fresh material at all had come from any external source, was confined to its facts, and the High Courts which read it as laying down a contrary rule fell into error. The Court gave the assessee six weeks to reply to the show cause notice, directed the officer to complete the reassessment expeditiously, and expressed no opinion on its merits.
The Court accepted that an assessee's duty is to disclose primary facts and that he need not tell the officer what inferences to draw, but held that the duty is to disclose them fully and truly. Once subsequent information shows that a disclosed transaction never happened, the disclosure was not true, and the second condition of section 147(a) is satisfied. From that the Court drew the distinction which is the ratio: acquiring fresh information, specific in nature and reliable in character, which exposes the falsity of the statement made at the original assessment, is a different thing from drawing a fresh inference from material that was already before the officer. The first is fresh information; the second is a change of opinion. Applying that, the letter of 7 July 1970 was specific in a way the material in Mewal Das was not, because it named the company, described the name lending business and identified the years, which matched the year of the claimed loan. Burlop Dealers was analysed at length: there the only new element was the officer's own view in a later year's assessment of the same assessee, which cannot by itself found a belief about an earlier year, and the observations there were made in that peculiar fact situation and are not of universal application. The Court then relied on T.S. Pl. P. Chidambaram, where a three judge bench held that the officer's failure to make further enquiry does not take the case out of section 34(1)(a) where the assessee has failed to place the material facts truly and fully, and on A.L.A. Firm, which held that information obtainable earlier by enquiry but not in fact obtained does not affect jurisdiction. Reviewing these, the Court set out the limits of review: since the belief is the officer's, the sufficiency of his reasons is not for the court, but the assessee may show that no belief existed, that it was not bona fide, or that it rested on vague, irrelevant or non-specific material, and to that extent the court may see whether the material had a rational connection or live link with the belief. Finally the Court identified the purpose of section 147 - to prevent a party who wilfully made a false statement from saying, once the falsity emerges, that the acceptance of his lie has tied the officer's hands. In the words reproduced by the source cited on this page: "it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information."
It was decided by the Supreme Court on 1993-07-13 and is reported as [1993] 203 ITR 456 (SC); AIR 1993 SC 2390; (1993) 4 SCC 77; JT 1993 (4) SC 291; 1993 (3) SCALE 180; [1993] Supp 1 SCR 28; (1993) 69 Taxman 627. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 147, section 148, section 149, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed with no order as to costs. The Income Tax Officer at Azamgarh had rightly initiated reassessment on the basis of subsequent information which was specific, relevant and reliable, and after recording the reasons for his belief that the assessee had not disclosed the material facts truly and fully in the original proceedings. The two conditions for jurisdiction under section 147(a) read with sections 148 and 149 - reason to believe that income had escaped assessment, and reason to believe that the escapement was occasioned by the assessee's omission or failure to disclose fully and truly all material facts - must co-exist, and both were satisfied. Where the transaction is found on subsequent information to be bogus, disclosure of it at the original assessment is not disclosure of the true and full facts. The officer's failure to defer the assessment and investigate the genuineness of the loan does not take away his jurisdiction to act on information received later. Mewal Das was distinguished because the confession there was vague and did not fix the period; here the confession covered 1962-63 to 1964-65, the very period of the claimed loan. Burlop Dealers, where no fresh material at all had come from any external source, was confined to its facts, and the High Courts which read it as laying down a contrary rule fell into error. The Court gave the assessee six weeks to reply to the show cause notice, directed the officer to complete the reassessment expeditiously, and expressed no opinion on its merits. It arises in Reassessment & Reopening and Cash Credits & Unexplained Money matters, on section 147, section 148, section 149 of the Income Tax Act 1961, and was decided by Supreme Court of India; judgment delivered by A.S. Anand, J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not run the argument that disclosure of primary facts closes the matter for good; where the underlying transaction is shown to be untrue, that argument fails. Ask to cross-examine the person whose confession or statement is relied on, and put on record what the cross-examination yields - here the creditor confirmed his confession and nothing was elicited to displace it. Answer the show cause notice. The assessee's silence in the face of the material gathered told against him. Test whether the reasons were actually recorded before the notice and whether the required sanction was obtained, since both are conditions of jurisdiction.
Validity check could not be completed. No later history was checked. The judgment construes section 147(a) and section 149 as they stood for assessment year 1963-64, before the substitution of section 147 with effect from 1 April 1989 which removed the clause (a) and clause (b) structure, and long before the scheme substituted from 1 April 2021 introducing sections 148A and 149 in their present form. How far the reasoning carries into those schemes has not been established from the material read, and the reader must check the provisions applicable to his own year. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested text is clipped: about 4,588 characters from the middle are not reproduced. That portion carried the rest of the Court's account of the circumstances it called tell tale - what the partner did with the money on his return to Azamgarh - and the opening of its discussion of ITO v Lakhmani Mewal Das, which resumes mid-sentence. The facts, the statutory provisions, the submissions, the treatment of Burlop Dealers, Chidambaram and A.L.A. Firm and the operative order were all read. The source page's header names S.C. Agrawal as author while the text records the judgment as delivered by A.S. Anand, J; the text is taken as authoritative and the header disregarded, but the composition of the Bench cannot be stated from what was read. The judgment expressly says nothing about the merits of the reassessment - whether the Rs.50,000 was in fact the assessee's own money - so it is authority only on the validity of initiation. It also does not deal with the years 1964-65 to 1968-69, for which notices were issued at the same time, beyond noting that interest had been allowed in those years. The batch line lists sections 147 and 148; section 149, which supplied the eight year period the Court worked with, is added. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed with no order as to costs. The Income Tax Officer at Azamgarh had rightly initiated reassessment on the basis of subsequent information which was specific, relevant and reliable, and after recording the reasons for his belief that the assessee had not disclosed the material facts truly and fully in the original proceedings. The two conditions for jurisdiction under section 147(a) read with sections 148 and 149 - reason to believe that income had escaped assessment, and reason to believe that the escapement was occasioned by the assessee's omission or failure to disclose fully and truly all material facts - must co-exist, and both were satisfied. Where the transaction is found on subsequent information to be bogus, disclosure of it at the original assessment is not disclosure of the true and full facts. The officer's failure to defer the assessment and investigate the genuineness of the loan does not take away his jurisdiction to act on information received later. Mewal Das was distinguished because the confession there was vague and did not fix the period; here the confession covered 1962-63 to 1964-65, the very period of the claimed loan. Burlop Dealers, where no fresh material at all had come from any external source, was confined to its facts, and the High Courts which read it as laying down a contrary rule fell into error. The Court gave the assessee six weeks to reply to the show cause notice, directed the officer to complete the reassessment expeditiously, and expressed no opinion on its merits.
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My return was only processed under 143(1). Does that stop the department reopening it later?
How much am I actually required to disclose — and can they reopen because the officer drew the wrong conclusion?
The sanctioning authority just wrote 'yes' and signed. Is that a sanction?
A reassessment was done in between. Does the two-year clock for s.263 restart from it?