1991 (8) TMI 161 - AT - Income Tax

Appellate Assistant Commissioner, Assessment Notice, Business Premises, Promissory Estoppel, Reassessment Notice

Issues Involved:
1. Validity of reopening assessments under Section 147(a) of the Income-tax Act.
2. Alleged assurance by the Income-tax Department regarding non-prosecution under Section 277 of the Income-tax Act.
3. Application of the principle of promissory estoppel.
4. Admissibility of appeals against reassessments based on consent returns.

Issue-wise Analysis:

1. Validity of Reopening Assessments under Section 147(a):
The Tribunal examined whether the reopening of assessments for the years 1966-67 to 1970-71 was justified. The Income-tax Officer (ITO) had reasons to believe that income had escaped assessment due to the firm's failure to disclose fully and truly all material facts. This belief was based on the discovery during a search on 23-1-1971, which revealed discrepancies in the firm's books, indicating suppressed sales and fabricated accounts. The Tribunal found that the material available, including the seized books and the statements of the partners, provided sufficient grounds for reopening the assessments. The Tribunal emphasized that the sufficiency of the grounds for the ITO's belief is not justiciable, and the existence of the belief can be challenged but not its adequacy.

2. Alleged Assurance Regarding Non-Prosecution:
The assessee claimed that the then Commissioner of Income-tax, Shri R.V. Ramaswamy, had assured that no prosecution would be initiated under Section 277 of the Income-tax Act if the firm settled its tax liabilities. The Tribunal found no evidence of such an assurance, whether oral or written. The minutes of settlement dated 29-9-1972 and the terms of settlement dated 20-3-1973 did not mention any such assurance. The Tribunal concluded that the alleged assurance was not substantiated and was likely a strategic claim by the assessee.

3. Application of the Principle of Promissory Estoppel:
The assessee argued that the principle of promissory estoppel should prevent the Income-tax Department from going back on its alleged promise not to prosecute under Section 277. The Tribunal, referencing the Supreme Court's decision in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, held that promissory estoppel could not be invoked against the government in the absence of a clear and unequivocal promise. The Tribunal found that no such promise was made, and even if it were, it would not preclude the government from performing its statutory duties.

4. Admissibility of Appeals Against Reassessments Based on Consent Returns:
The Tribunal addressed whether the appeals against the reassessments were admissible, given that the reassessments were based on the returns filed by the assessee itself as part of a settlement. Citing the Madras High Court decision in Ramanlal Kamdar v. CIT and the Kerala High Court decision in CIT v. Cochin Malabar Estates & Industries Ltd., the Tribunal held that appeals against assessments made with the assessee's consent are incompetent. Since the reassessments were agreed upon and the assessee had derived benefits from the settlement, the Tribunal concluded that the appeals were not maintainable.

Conclusion:
The Tribunal upheld the reopening of assessments under Section 147(a) as valid, dismissed the claim of an assurance regarding non-prosecution, rejected the application of promissory estoppel, and ruled that the appeals against the reassessments were inadmissible. Consequently, the orders of the Commissioner (Appeals) were upheld, and the appeals of the assessee were dismissed.

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