9911796707
TMI Blog1986 (12) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 11-11-1971. The income declared by the assessee-firm was accepted as correct. However, this assessment was reopened under section 147 by notice issued on 5-7-1975. The reopening was the consequence of the belief entertained by the ITO that the assessee-firm had done business in these other names also like Pillai Enterprises, Sagar Enterprises, etc. This assessment was completed on 28-3-1980 under section 144 of the Act. The ex parte assessment was because the assessee had not complied with the some of the requirements of the notices of the ITO. This assessment under section 144 was, however, reopened by the ITO under section 146 of the Act. The order under section 146 passed on 9-7-1980 accepted that the assessee had reasonable cause for not complying with the notices. Thereafter, the assessee was given several opportunities to produce the evidence. But again there were, according to ITO, defaults. With the result that he made another ex parte assessment on 9-2-1983. This assessment was also reopened under section 146 by his order dated 15-3-1983. Thereafter, the ITO gave a hearing to the assessee and completed the assessment by his order dated 26-10-1983. In this order, unlik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These assessments have been finalised after twice being reopened under section 146 on 29-10-1983 for both the years. The Commissioner had issued the notice for revising the assessment under section 263 on 7-10-1985. 6. The provision enabling the Commissioner to revise the assessments were amended by the Taxation Laws (Amendment) Act, 1984 with effect from 1-10-1984. Before the amendment to sub-section (2) of section 263 read as follows : " (2) No order shall be made under sub-section (1)-- (a) to revise an order of reassessment made under section 147, or (b) after the expiry of two years from the date of the order sought to be revised." Now, this provision has been removed from the statute from 1-10-1984. Another sub-section which is numbered as sub-section (2) has been substituted but, the amended sub-section retains in substance only clause (b) of the original sub-section (2). In other words, the bar on revision of a reassessment under section 147 which existed till 1-10-1984 has been removed. 7. The first contention of Shri Satyanarayana is that the assessments under section 147 for both these years were completed on 29-10-1983 and as on that date the assessee was im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right which has accrued to a party. That right cannot be taken away by a subsequent amendment. Strong reliance has been placed on this authority. According to Shri Satyanarayana when the assessment was completed on 29-10-1983, the assessee had become immune from revision under section 263 as the law stood at that time. A subsequent amendment of provisions of section 263 enlarging the scope of revision by including the assessments under section 263 cannot be availed of in respect of the reassessments already completed. That is because the assessee had already acquired a right against such revision. 8. We think there is considerable substance in this submission. The law on this point seems to be well settled and we need only to refer one or two Supreme Court decisions. We will first refer to the decision of the Supreme Court in the case of S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1. This is a land mark judgment which trenches on several issues. One of the issues considered was the identical point. The matter related to the amendment to section 34 of the Indian Income-tax Act, 1922 ('the 1922 Act'). This amendment enlarged the power of reassessment by the ITO at any time t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om. . . ." According to the Supreme Court although limitation is a procedural law and although the Legislature can extend the period of limitation an important right accrues to an assessee when the remedy against him is barred by the existing law of limitation. The assessee gets a vested right. This vested right cannot be affected by an amendment except by express terms used by the statute or the clearest implication flowing from them. So we have to see whether the amendment made under section 263 has by express terms had applied those provisions to reassessment proceedings which had already become final and whether there is a necessary implication to that effect. We do not find any such express terms and neither do we find any necessary implication to hold in favour of the conferring jurisdiction to the Commissioner. 9. Shri Santhanam appearing for the department had submitted that the amendment made on 1-10-1984 was only a procedural amendment. According to him, the revisionary powers contained in section 263 are merely procedural and this is on the authority of the observation of the Supreme Court in the case of CIT v. National Taj Traders [1980] 121 ITR 535. He referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on a concession of the revenue that the right of the ITO to reopen the assessment had become barred before the later time has come into force. The Supreme Court had not, therefore, considered the ambit of the section and the decision given on concession cannot have binding force. He then pointed out that the assessment under section 147 need not have been completed on 29-10-1983. It could have been completed even after 1-10-1984. It was a mere accident that the assessment was completed before 1-10-1984. If that is so, i.e., if the assessment could have been completed after later date then the submissions of the assessee could not have been acceptable to out-jurisdiction. The assessment was completed earlier. Shri Santhanam had also made a point that the assessments were not under section 147 at all but they were assessments under section 146. Even under section 146, the ITO could have completed the assessment by 31-3-1985 since the order under section 146 was passed on 15-3-1983. Finally, Shri Santhanam submitted that it would not be correct to consider section 263 to be materially similar to section 147. There are lots of differences between the reopening of the assessment und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght has already accrued and if that right has accrued because of accident of the date falling before 1-10-1984, it is no use stating that the ITO would have completed the assessment on 1-10-1984 also. 14. We are also not accepting this submission that the assessment has been done under section 143(3) of the Act only. The ITO has assumed jurisdiction by issuing notice under section 147 only. Therefore, it is an assessment made under section 147 and as the law stood at that time could have not been reached the Commissioner under section 263. 15. We may now consider the other submissions. Shri Satyanarayana for the assessee had submitted that the Commissioner's powers of revision under section 263 will not extend to revise an assessment made by the ITO after applying his mind. He agreed that in cases where the ITO has not applied his mind at all, it may be open for the Commissioner to revise that order. But in a case where the ITO has applied his mind and has given a finding, it cannot be said that the order is erroneous merely because the Commissioner on appraising the same evidence draws a different inference. We are unable to accept this submission. This point has already come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in them. For instance, one of the cheques is for Rs. 15,000. The other for Rs. 10,000. On the reverse of these cheques, Shri P. Ganesh partner had signed for receipt of the amount from the bank. 19. The department had also got the details of the accounts maintained in the name of Vaidyanathan. Since they reflected large transactions, they started an enquiry as to the person responsible for these transactions. The first person obviously to be examined is Vaidyanathan because the account was in his name. The other partners were also examined. The partners Balraj, Laxmaiah and Sathaiah were examined on 19-8-1974. Shri Ganesh was examined on 20-8-1974 and Sambaiah had been examined on 23-8-1974. 20. In chronology, we would take up first the statement given by Sathaiah. He stated before the assistant director that there were businesses run by the firm in the name of Sagar Enterprises and Pillai Enterprises. This is what he stated : " The business run in the name of Sagar Enterprises and Pillai Enterprises was being shown in the books of Srinivasa Metal Works. Sagar Enterprises was run in the name of L. S. Vaidyanathan who is residing at Praga Tools--I do not remember wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith conflicting statements given by the partners of the assessee-firm. We have to decide which of these versions are correct. For this purpose, we have to naturally look into the other surrounding circumstances and seek corroborative material evidence. 22. The next material is the evidence of Vaidyanathan who was examined on 17-2-1975. He stated as follows : " During the period of my employment in Srinivasa Metal Works an account was opened in my name in Canara Bank, R.P. Road, Secunderabad. This account was opened in the year 1970. This was opened with the introduction either P. Sathiah or K. Lakshmaiah, who are partners in Srinivasa Metal Works. Though the transactions are in my name they did not relate to me. The transactions related to only Srinivasa Metal Works. The transactions related to amounts remitted from places outside the state towards sales of iron. In order to supress the real turnover the firm of Srinivasa Metal Works have introduced the account in my name. The extent of the transactions is about Rs. 3 lakhs to 4 lakhs. During that period I am only an employee of Srinivasa Metal Works and I acted according to their instructions." Shri Vaidyanathan was examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciate the evidentiary value of his statement, we may refer to some of the objections of Shri Satyanarayana, the learned counsel for the assessee. According to him, the statement given by Sambaiah was under coercion from Sathaiah and Ganesh. This submission is based on a letter written by Sambaiah on 19-3-1975 to the ITO. Shri Sambaiah has also filed an affidavit in which he had stated that the statement was given under threat from Sathaiah. He had also filed a complaint before the Deputy Commissioner of Police, Hyderabad. It is on the basis of this material, which are certainly contemporaneous, that it is submitted that it cannot be taken at its face value. 25. A statement given under coercion cannot, of course, have much evidentiary value. However, if that statement is corroborated by other documents then the submission that they were given under coercion cannot be accepted and its evidentiary value cannot be minimised. From the extract of the statement given, it would be seen that Sambaiah was referring to certain entries which were shown to him in certain books of accounts. These accounts were in the possession of the department and these evidenced some of the clandestine tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own to you it is clear that you were writing not only the regular accounts intended for the Income-tax Department but also a duplicate sets of books maintained for sharing secret profits earned by the firm ? Answer : Yes. I have written two sets of account books. One for showing to the Income-tax Department and another duplicate set of books for sharing the real profits among the partners." It will be noteworthy that he accepts that he had written two sets of accounts, one for showing the Income-tax Department and the other showing real profits. This statement is certainly not claimed to be given under coercion. It does support department's case. 28. As we stated earlier, the partners Sathaiah and Ganesh had admitted doing business outside books in benami names. Shri Satyanarayana, the learned counsel for the assessee submitted that their statements cannot be accepted and for this purpose, he referred to certain other documents like voluntary disclosure made by Sathaiah and Ganesh and pointed out that these documents do not support Sathaiah's statement that the benami concerns belong to the assessee-firm. According to Shri Satyanarayana they might be benami concerns of Sathai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1982 and 23-4-1982, respectively. It may be remembered that when Vaidyanathan was first examined in 1975, these two partners reserved their rights to cross-examine him. Whether such a cross-examination was allowed, it is not clear. In the statements given in 1982, they have stuck to their position that the concerns Pillai Enterprises and Sagar Enterprises have nothing to do with them. They had repeatedly denied his knowledge about these concerns. Shri Laxmaiah had also denied any connection with the alleged benami concerns. It is necessary to see whether their denial has to be accepted as correct in preference to the statements of other partners. We are of the opinion that the statements of other partners should be accepted in this matter. As we have pointed out that the statements of two of the partners Sathaiah and Ganesh clearly admit such benami concerns. Sambaiah has admitted maintenance of duplicate books of accounts and has been confronted with the entries in those books of accounts. Aziz has accepted that he was purchasing permits from other traders which is one of the businesses of the benami concerns. Shri Vaidyanathan in his deposition has stated that he is only an empl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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