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TMI Blog2006 (6) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... Reasons for reopening the assessment were not disclosed to the assessee or formally communicated to her - HELD THAT:- Before us as also before the Assessing Officer, the assessee has been harping that she did not receive the notice herself as she was away to Pakistan. In fact, in her letter dated 10-3-1998 to the Assessing Officer, she has stated, in a very guarded language that the notice under section 148, if served, might have been left unattended by her servant and that the existence of the notice came to her knowledge for the first time on10-3-1998 when her statement was recorded under section 131. We do not see how the assessee can say at the same breath that she was not served will the notice under section 148 and also that she was not being given reasons for reopening the assessment. This again is only a passing observation. Assessee was not served with the notice under section 148 - HELD THAT:- It is no doubt true that the service of the notice under section 148 is a condition precedent for the validity of the reassessment proceedings. However, in the peculiar facts and circumstances of the present case, we are unable to hold that the reassessment proceedings can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE-PRESIDENT AND P. M. JAGTAP ACCOUNTANT MEMBER For the Appellant : Salil Aggarwal. For the Respondent : Shantanu Dhamija. ORDER R. V. EASWAR (VICE-PRESIDENT). This appeal by the Department pertains to the assessment year 1993-94 and the only ground taken is as follows : Based on the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in annulling the assessment order dated March 28, 2000, on the ground that the same is ab initio null and void although there were sufficient reasons to believe as recorded by the Assessing Officer that income has escaped assessment before issuing notice under section 148 of the Income-tax Act, 1961. 2. The brief facts leading up to the appeal are these. The assessee is an individual. She filed her return of income declaring income of Rs. 5,25,050/- on June 30, 1993, which was processed under section 143(1)(a). The case was reopened on the ground that there was information that the assessee had made some payments for the purchase of a farmhouse which were not declared in the accounts. Notice was issued under section 148 on December 28, 1995, but the proceedings were sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax (Appeals) held that the reasons recorded by the Assessing Officer to reopen the assessment did not amount to reason to believe but merely amounted to reason to suspect that income chargeable to tax has escaped assessment, which was contrary to the judgment of the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. According to him the Assessing Officer failed to appreciate that on the basis of the intimation received from the Addl. DIT, CIB, only further investigation could have been carried out and it could not be presumed that the gift made by J.S. Kochhar to the assessee was a bogus gift. He noted that in the list of 41 persons to whom Kochhar was supposed to have given gifts, the name of the assessee did not figure and therefore the Assessing Officer was not justified in presuming that Batra had arranged a bogus gift in favour of the assessee. According to the Commissioner of Income-tax (Appeals), the suspicions of the investigation wing (the CIB) in this regard cannot be regarded as the ' reason to believe' of the Assessing Officer that income has escaped assessment and that it can only be regarded as reason to suspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing points were sought to be raised in defence of the order of the Commissioner of Income-tax (Appeals) : (a) No reasons were recorded for reopening the assessment as required by section 148(2). (b) The reasons recorded, if any, were not supplied to the assessee despite repeated requests. (c) The notice under section 148 has not been served on the assessee and non-service of the notice is fatal to the validity of the reassessment. (d) The Assessing Officer has not taken the approval of the Joint Commissioner of Income-tax before issuing the notice under section 148 as required by section 151(1) of the Act. (e) Section 148 cannot be used for making a fishing or roving enquiry. In this case, the Assessing Officer was merely called upon by the Deputy Commissioner of Income-tax to examine and investigate the matter whereas the Assessing Officer chose to shortcut the proceedings and proceeded to issue the notice before formation of the belief. (f) The mere allegation made by the CIB that the assessee purchased the gift from Kochhar is not relevant for the formation of the belief and before issuing the notice under section 148, the Assessing Officer failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years have passed and since the Department has not been able to produce the records, it cannot now be contended that these points cannot be taken before the Tribunal. It was also vehemently denied that the new points raised by the assessee in defence of the ultimate decision of the Commissioner of Income-tax (Appeals) would involve investigation into the facts. A distinction was sought to be made between investigation into the facts and investigation into the record and it was submitted that the points raised by the assessee involve mere examination of the record and do not involve investigation into facts not already on record. Our attention was also drawn to several letters written by the assessee to the Assessing Officer informing him that the notice had not been served on her and that she was complying with the same and participating in the proceedings without prejudice and in a spirit of co-operation which cannot amount to waiver of her rights. It was thus pleaded that the assessee was entitled to raise these points before the Tribunal and that the preliminary objections of the learned senior Departmental Representative have no merit. 10. Before we proceed further, it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 151(1) it is fairly admitted on behalf of the assessee that this was not specifically taken either before the Assessing Officer or before the Commissioner of Income-tax (Appeals) and therefore, we hold that rule 27 may not be strictly speaking available to the assessee. 11. Even de hors rule 27 of the Appellate Tribunal Rules, it is open to the respondent in an appeal before the Tribunal to raise a new ground in defence of the order appealed against. It has been so held by the Supreme Court in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232. At page 237 of the report it was held that even assuming that rule 27 is not strictly applicable, the Tribunal has inherent powers under section 254(1) to entertain the argument of the respondent which amounted to a new ground. It was further held by the Supreme Court as follows : It is necessary to state that rules 12 and 27 are not exhaustive of the powers of the Appellate Tribunal. The rules are merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under section 33(4) of the Act. 12. It is significant to note that in the case before the Supreme Court, the Department which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new points raised by the assessee, so far as the claim that no reasons were recorded is concerned, we are unable to accept the same. It is no doubt true that the Assessing Officer did not furnish the reasons recorded for reopening the assessment to the assessee. It is also true that the Department has not been able to produce the record before us despite several opportunities being granted to do so. Normally in such circumstances we would have had no hesitation in accepting the claim that no reasons were recorded before issuing notice under section 148. In fact, there are certain orders of the Delhi Bench of the Tribunal holding so (please see Suresh Chand Garg v. Asst. CIT [1992] 42 ITD 166). However, we are not inclined to hold that no reasons were recorded by the Assessing Officer before issuing the notice under section 148 because there is sufficient material in the order of the income-tax authorities themselves which enable us to infer that the reasons were in fact recorded. When the appeal was heard by the Commissioner of Income-tax (Appeals), the Assessing Officer was called upon to comment on the assessee' s claim that the reasons recorded had no rational connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded from her on March 10, 1998, and informing the Assessing Officer that since Kochhar is out of India, some more time is required to produce him before the Assessing Officer. The assessee also furnished the address of Kochhar in Dubai and requested the Assessing Officer to write to him directly to Dubai. 16. We find force in the contention of the learned Senior Departmental Representative that having regard to the contents of the letters referred to above, written by the assessee, she was quite aware that her assessment had been reopened and she was also aware as to the reasons for the reopening. She was fully aware of the enquiries conducted by the Assessing Officer and in fairness it must be stated that she also exhibited a spirit of co-operation in the enquiry and seems to have participated willingly. She did make attempts to contact Kochhar and requested him to appear before the Assessing Officer specifically referring to the enquiries made by the Assessing Officer with regard to the gift of Rs. 21 lakhs. All these show that the assessee was fully aware of the reasons for reopening the assessment. To repeatedly insist that the Assessing Officer should formally communi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons of the Income-tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. The scheme of section 34 of the Act is that, if the conditions of the main section are satisfied, a notice has to be issued to the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22. But before issuing the notice, the proviso requires that the officer should record his reasons for initiating action under section 34 and obtain the sanction of the Commissioner who must be satisfied that the action under section 34 was justified. There is no requirement in any of the pro visions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under section 34 must also be communicated to the assessee. In Presidency Talkies Ltd. v. First Addl. ITO [1954] 25 ITR 447 the Madras High Court has expressed a similar view and we consider that that view is correct. We accordingly reject th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arping that she did not receive the notice herself as she was away to Pakistan. In fact, in her letter dated March 10, 1998, to the Assessing Officer, she has stated, in a very guarded language that the notice under section 148, if served, might have been left unattended by her servant and that the existence of the notice came to her knowledge for the first time on March 10, 1998, when her statement was recorded under section 131. We do not see how the assessee can say at the same breath that she was not served with the notice under section 148 and also that she was not being given reasons for reopening the assessment. This again is only a passing observation. 19. That takes us to the next plea of the assessee before us that she was not served with the notice under section 148. Specific grounds have been taken to this effect before the Commissioner of Income-tax (Appeals) (ground No. 9) as also in the statement of facts before the Commissioner of Income-tax (Appeals). It is no doubt true that the service of the notice under section 148 is a condition precedent for the validity of the reassessment proceedings. However, in the peculiar facts and circumstances of the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 148, acknowledging the same and therefore there ends the matter. The objection appears to us to be untenable. 21. So far as the objection based on section 151(1) is concerned, we are unable to entertain the same. Under this provision, in a case where an assessment has been made under section 143(3) or section 147, no notice under section 148 shall be issued by an Assessing Officer who is below the rank of Asst. Commissioner of Income-tax or Deputy Commissioner of Income-tax unless the Joint Commissioner of Income-tax is satisfied on the reasons recorded by the Assessing Officer, that it is a fit case for issue of such notice. This section applies only where an assessment has already been made under section 143(3) or section 147 and it is sought to be reopened. In the present case, there was no earlier assessment order under section 143(3) or section 147 which was communicated to the assessee. The return filed on June 30, 1993, was merely processed under section 143(1)(a). The contention of learned counsel for the assessee however was that the assessment was earlier reopened by the Assessing Officer by notice issued under section 148 and only after having been sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the said Assessing Officer, but even the assessment in pursuance of the said notice was completed by him with a designation of the Deputy Commissioner of Income-tax as changed/revised as a result of reorganization/restructuring taking place in the Income-tax Department with effect from October 1, 1998. Obvious as it is, the case of the assessee did not fall under sub-section (2) of section 151 and the satisfaction of the Joint Commissioner of Income-tax was not required to be obtained on the reasons recorded by the Assessing Officer before issuing the notice under section 148. We therefore reject the contention raised by learned counsel for the assessee on this issue. 22. We now turn to the main question whether the Commissioner of Income-tax (Appeals) was right in holding that the Assessing Officer did not have reason to believe that income had escaped assessment, but merely had reason to suspect . The CIB had written to the Assessing Officer on December 16, 1997, that during the financial year 1992-93 the assessee has received a gift of Rs. 21 lakhs from an NRE Shri Jagjit Singh Kochhor and that the investigation wing has noticed that the gift is bogus and arranged by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired of the Assessing Officer is that he must have reason to believe and not that he should launch an investigation and come to a positive finding before issuing the notice . . . and that the facts on the basis of which he entertained the belief need not at this stage be irrebuttably conclusive to support his tentative conclusion . In Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173 the hon'ble Delhi High Court, referring to the judgment of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662 held that at the time of initiation of action to reopen the assessment (by issuing notice under section 148) the final outcome of the proceeding is not relevant and what is required is reason to believe but not the established fact of escapement of income . It was held that at the stage of issue of notice (page 185), the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage . Therefore, there is no force in the submission of learned counsel for the assessee that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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