9911796707
TMI Blog1995 (5) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... as such by the department for so many years. During the course of assessment proceedings for assessment year 1982-83 the Assessing Officer (hereinafter referred to as the AO) found that more than 50 per cent shares of the assessee-company were held by the family of Shri Shantilal A. Shah and his two sons and control over the affairs of the company was with less than five persons of that family. These facts came on record from the enquiries made by the Assessing Officer who recorded the statement of Ratilal Khushaldas, one of the directors of the assessee-company who stated that the company was managed by Shantilal A. Shah, his daughter-in-law, Smt. Smrutiben and Bahubali Shah, his son. Not only this, Shantilal A. Shah vide letter dated 30-5-1985 admitted to have control over the management of the assessee-company and even prayed vide letter dated 13-8-1985 that matter be referred to the Settlement Commission. Further said Shantilal A. Shah vide letter dated17-10-1985agreed that company may be treated as closely-held company for assessment year 1982-83. The Assessing Officer on the basis of above referred to materials had reasons to believe that assessee had omitted/ failed to furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that Assessing Officer has not brought anything on record to prove that assessee-company was closely-held company in assessment years 1969-70 to 1981-82. The learned CIT (Appeals) after considering all the facts, dealt with the legal plea raised before him and concluded that primary condition laid under section 149(1)(a)(ii) of the Act was not satisfied as in none of the assessments for assessment years 1969-70 to 1976-77 the escaped income was of Rs. 50,000 or more and after placing reliance on the case law concluded that notice under section 148 of the Act is invalid and further admissions of the assessee were treated as without substance in view of the decisions of Hon'ble Jurisdictional High Court in the case of P.V. Doshi v. CIT [1978] 113 ITR 22 (Guj.) and other cases of Hon'ble Supreme Court. Accordingly, he allowed all the appeals for assessment years 1969-70 to 1976-77. 5. Against this consolidated order of ld. CIT (Appeals) dated 27-3-1987 relating to assessment years 1969-70 to 1976-77 only four appeals relating to assessment years 1973-74 to 1976-77 have been filed before us and nothing has come on record as to what happened to the order of ld. CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantive though approximately income chargeable to tax escaped assessment may not be Rs. 50,000 or more. In the end the ld. D.R. has placed reliance on decision of the Tribunal Ahmedabad Bench ' B ' in the case of ITO v. Saurashtra Cement Chemical Industries Ltd. [1986] 18 ITD 414 in which the facts were alike and the Bench concluded that expression " escaped assessment " as defined in Explanation 1 to section 147 of the Act, has to be given the same meaning while construing the provisions of sections 148 to 151 of the Act as aforesaid. Giving out the scheme of the Act for reassessment it was pointed out that section 147 deals with the nature of income which may amounts to escaped assessment and section 148 deals with the issue of notice for the purpose of assessment, reassessment or recomputation while section 149 lays down time limit for the issue of notice, section 151 deals with the sanction of CBDT and CIT for issue of notice, Bench held that these sections, therefore, form part of the scheme of reassessment and the expression " escaped assessment " should be used as defined in Explanation 1 to section 147 of the Act and that will include income assessed at too low a rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as closely-held company instead of widely-held company and further raising no objection for reopening of the assessment from assessment year 1969-70 onwards, the learned counsel for assessee pointed out that the judgment of the case of P. V. Doshi is reply to the same as even consent given by the assessee for reopening of the assessment win not conferjurisdiction on the Assessing Officer if there was initially lack of jurisdiction on account of some provisions of law. He was referring to the provisions of section 149(1)(a)(ii) in which income chargeable to tax which has escaped assessment should be Rs. 50,000 and according to him in the case in hand undisputedly the assessee had been assessed on the same income as it was assessed in the original assessments relating to assessment years 1969-70 onwards. He further pointed out that view of the ITAT Ahmedabad Bench in the case of Saurashtra Cement Chemical Industries Ltd. relied upon by the ld. D.R. was not based on correct interpretation of the provisions of Act. Referring to para 6.3 of the order, the learned counsel pointed out that the Tribunal has treated the provisions of sections 147, 149 and 151 as machinery sections whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been no omission or failure as mentioned in clause (a) on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or depreciation allowance, as the case may be, for the assessment year. Explanation 1: For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-- (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 relief under this Act or under the Indian Income-tax-Act, 1922 (1 of 1922) ; or (d) where excessive loss or depreciation allowance has been computed." After that provisions of section 148 relate to issuance of notice and what is expected from the Assessing Officer before issue of notice and for its issuance reads as follows : " 148. Issue of notice where income has escaped assessment :--(1) Before making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence took place between the Assessing Officer and assessee and it was admitted by the assessee that it has no objection for reopening of earlier assessment(s) and paying the taxes according to law. 13. The pleas raised from the side of revenue and the contention of learned counsel for assessee are entirely covered in the decision of Jurisdictional High Court in the case of P. V. Doshi. Briefly stated the facts of that case were that in original assessment relating to assessment year 1960-61, the assessment was completed on2-12-1961and in assessment year 1961-62 the ITO noticed that assessee had sold gold worth Rs. 19,421. He issued notice on3-9-1963for reassessment and assessee filed return of income on3-10-1963. During assessment proceedings assessee took the plea that notice of reassessment was not valid and also relied upon the affidavit of one person so far as merit was concerned. The ITO framed the assessment order against which appeal came before AAC but contention about the validity of notice was given up and on merits the AAC dismissed the appeal against which the matter came up before the Tribunal and the Tribunal remanded the matter for limited purposes that the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dships to the facts in hand then if assessee makes an admission submitting itself to the jurisdiction of an authority which otherwise lacks then such conferring of jurisdiction is unwarranted nor objection to the lack of jurisdiction can be treated as stood waived by mere submissions of the assessee. The result shall be that plea of the ld. D.R. that assessee has complied with the notice issued under section 147(a) read with section 148 by filing of returns of income showing status as closely-held company and consented to reopening the earlier assessments and to pay due taxes on the returns, became forceless in view of the decision of Hon'ble Jurisdictional High Court as if otherwise the jurisdiction is lacking then these acts of the assessee merely will not be sufficient to confer the jurisdiction on the authority. 16. Coming to the other aspect of the matter relating to the merits of legal plea raised by the assessee before CIT (Appeals) and before us about the jurisdiction of the Assessing Officer for reopening the assessment relating to assessment years 1969-70 to 1976-77 which were relating to the period of 8 years to 16 years from the last date of assessment year in which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e his assessment order is going to be disturbed. It is due to this, the Legislature imposed stringent condition that income chargeable to tax which has escaped assessment should be not less than Rs. 50,000. In other words petty matters should not be reopened to cause harassment to assessee but the fact remains that the Legislature has not laid down any criteria for amount of tax payable but criteria is that of income chargeable to tax in reopening of assessment for more than 8 years to 16 years. If we apply this criteria then naturally the income remained unchanged in reopening of all those assessments and thus no justification for reopening of those assessments because the same were strictly prohibited by the provisions of section 149(1)(a)(ii). Further, if there was no jurisdiction then no notice should be issued as prohibited under section 149(1). If notice is issued, it will be invalid. 18. On the basis of what has been discussed above, the cumulative effect shall be that on the basis of facts of the case of assessee relating to assessment years 1969-70 to 1976-77, the escaped income chargeable to tax was not of Rs. 50,000 or more as is required under section 149(1)(a)(ii) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as were decided against the assessee by CIT (Appeals)-V, Ahmedabad, vide his consolidated order dated 13-4-1986. However, as assessee also challenged the reassessment on merit, the ld. CIT (Appeals) entertained the evidence of the assessee relating to its contention about its status as industrial company and about shares holding position for assessment years 197778 to 1981-82 and also the evidence relating to constitution of Board of Directors of the company for each assessment year and after examining these newly admitted evidence concluded that the assessee-company was a company in which pub1ic were substantially interested for these five years. The revenue has come in appeals. 20. Coming to the facts as have come on record, it is apparent from the assessment orders relating to assessment year 1977-78 to assessment year 1981-82 that assessee did not contest the status rather admitted that it has no objection to reopening of reassessment and even expressed its desire to pay the taxes due if that assessee is treated as closely-held company. However, the assessee took somersault before CIT (Appeals) in appeals where the assessee raised not only legal plea but filed documentary evi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
