9911796707
TMI Blog1991 (8) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... see firm were completed under section 143(3) even before 23-1-1971. On 23-1-1971 the Madras Unit of the Intelligence Wing of the Income-tax Department conducted survey operations under section 132 of the Income-tax Act in the business premises of the assessee firm and it had taken possession of certain books and papers. The account books which were taken possession of by the department include the account books maintained for the Samvat year 2026, relevant to the assessment year 1971-72. On the date of inspection Shri Bhawarlal Jain, one of the partners of the firm and Shri Sohanlal, the Munim working in the assessee firm, inter alia, were examined on oath. Shri Bhawarlal Jain was examined after the Munim Sohanlal was examined and when the Munim Sohanlal was deposing on oath before ADI(I) Shri Bhawarlal Jain was present and heard what he deposed. Subsequently when Bhawarlal Jain himself was examined the following question was put to him, for which the following answer was given on oath : " Q : You have heard your Munim Sohanlal deposed before me on oath regarding some account books and slips taken from the Godrej cupboard of your firm just now in the course of our search. What you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned that Shri Bhawarlal Jain was examined again on oath on 27-9-1971. In the said examination he deposed that all his liabilities were found in his personal books of accounts and none of them were found outside the accounts. M/s. K.G. Kothari Co. deals in chemical stones. He is a partner in the said firm and the firm in its present form was formed in 1964 and he had 1/3rd interest in the same. Shri Labchand and Shri Chaganlal were the other two partners in the said firm. A question was put to him as to what role he played in the business of M/s. K.G. Kothari Co., for which he replied that there was no division of work among the partners. Whenever there was time he used to attend to his business, particularly sales. Question Nos. 8,9,10,12,13, 14 and 15 and the answers given under each of them are felt important and hence they are extracted as under :--- " 8. You are aware that there was a search in the business premises of the firm M/s. K.G. Kothari Co. in January 1971 and several books of account and other papers were seized. Among the books seized are (a) ledger for the accounting year 1968-69 produced in connection with the income-tax assessment for 1970-71 of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, namely, with the Income-tax Officer, Inspecting Assistant Commissioner and the Commissioner of Income-tax. Shri S. Bapu was the then Income-tax Officer in Central Circle VIII, Madras. Shri T.A. Balakrishnan was the Inspecting Assistant Commissioner, Central Range-I, Madras and Shri R.V. Ramaswamy was the Commissioner. The talks of settlement took place over a considerable length of time. Before the settlement for talks were Completed and final decisions reached, Shri S. Bapu was transferred as Secretary to the Central Board of Direct Taxes. So also Shri Balakrishnan was transferred, whereas Shri Ramaswamy, the Commissioner, with whom most of the terms of settlement were arrived at, died on 14-7-1972. It is the case of the assessee that the main purpose for which the settlement was sought for by the assessee was only to avoid prosecution under section 277 of the Income-tax Act. It is the definite case of the assessee that a categorical assurance was given by Shri Ramaswamy, the then Commissioner that he would not launch any prosecution against the partners of the assessee firm under section 277 of the Income-tax Act and that he would sympathetically consider the case of partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,46,790 for the assessment year 1968-69, Rs. 1,55,278 for the assessment year 1969-70 and Rs. 1,38,619 for the assessment year 1970-71 as agreed to under the terms of the settlement. Reassessment under section 143(3) read with section 147 were completed by the Income-tax Officer, Central Circle VIII, Madras for these assessment years under separate assessment orders dated 31-3-1973. Long after the reassessments were thus completed, having been threatened with prosecution the assessee filed a petition dated 15-7-1974 before the Central Board of Direct Taxes. The ultimate prayer in the petition is that the Revenue should give up the prosecution proceedings and the alleged assurance given by the then Commissioner, Central, late Shri Ramaswamy, should be honoured. The verbatim of the petition dated 15-7-1974 which the assessee firm preferred before the Central Board of Direct Taxes was already extracted by this Tribunal in its earlier common order dated 17-1-1977 passed in ITA Nos. 2455 to 2459 (Mds.)/1974-75 while allowing the assessee-firm's appeals for condonation of delay in filing appeals before the Appellate Assistant Commissioner for these assessment years. Hence it is quit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the matter was taken up for hearing the contents of the petition dated 15-7-1974, which the assessee had filed before the Central Board of Direct Taxes, were set up as the main argument of the assessee-firm. The Revenue filed the written submissions dated 6-9-1976 before the Tribunal. In reply to the said submissions the assessee filed its own written submissions dated 20-9-1976. With reference to those submissions dated 20-9-1976, the department was requested by the Tribunal to file a point by point reply, which was filed on 30-11-1976. After extracting the petition dated 157-1974, which the assessee-firm had preferred before the Central Board of Direct Taxes, the written submissions filed by the Revenue dated 6-9-1976 as well as the point by point reply dated 30-11-1976 filed by the Revenue at the instance of the Tribunal in extenso, the Tribunal found at para 11 that they were satisfied that the note filed by the Revenue dated 30-11-1976 contained a full, fair and complete statement of the proceedings, which took place before the department as far as the factual aspects are concerned. Therefore, the Hon'ble Tribunal did not consider it necessary to call for the original incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est belief formed by the assessee that there would be no prosecution under section 277 of the Income-tax Act, 1961, was sufficient and it was not necessary for the assessee to establish the legal tenability of that belief beyond the pale of all arguments ". Ultimately they allowed the appeals, condoned the delay and directed the Appellate Assistant Commissioner to dispose of the appeals in accordance with law. The Tribunal rejected references against their order dated 17-1-1977 in RA Nos. 6 to 10(Mds)/1977-78 by their order dated 18-6-1977, a copy of which was provided at pages 47 to 49 of the assessee's paper book. The Tribunal held that their decision was given on an appreciation of facts and no question of law was involved in their order dated 17-1-1977. 3. The learned Commissioner (Appeals)-II, Madras, in pursuance of the Tribunal's order and in a bid to implement those orders, consolidated the appeals for the assessment years 1966-67 to 1970-71, heard the arguments advanced and disposed them of by his common order dated 29-3-1984. At para 5 of his order to arguments advanced for the assessee-firm were noted. At para 6 the authority relied upon by the assessee-firm, namely, N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee-firm were not justified and they should be deleted ". 5. Against the legality of reopening under section 147(a) the arguments of the assessee-firm run as follows : " (i) Notices of reopening were issued without any information or material or evidence to show that the income had escaped assessment within the meaning of several judicial pronouncements by various courts of law, (ii) The reasons recorded for issue of notices under section 148 were totally vague and no definite material or information or evidence was placed by the department which would justify the Income-tax Officer to entertain a reasonable belief that income chargeable to tax had escaped assessment ; and (iii) No records were placed by the department to show that valid reasons were recorded and proper sanction was obtained from the Commissioner for reopening the assessments ". The assessee filed a paperbook running into 100 pages, whereas the department filed a paperbook containing items A to K and also pages 1 to 9. The paperbook filed on behalf of the assessee contained not only all the documents relied on by the assessee, but also copies of A to J filed by the department. Copies of documents A to J filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k place on the date of search to the date of filing the letter dated 9-10-1971 praying for settlement, would show clearly that it is the assessee who started the settlement proceedings and who felt the urgency for going in settlement with the department, realising that in the absence of settlement it would be in for greater danger. When the truth is like that, the learned counsel for the assessee tried to persuade us with his version that in fact the initiative for settlement came from Shri R.V. Ramaswamy, the then Commissioner of Income-tax. In fact by its written submissions dated 20-9-1976 filed before the Tribunal when the appeals relating to limitation were pending with this Tribunal, the following submission was made : " It is true that the appellant's premises was searched on 23rd January, 1971. Subsequent to the search the assessee's case was transferred from the City Circle IV, Madras to Central Circle VIII, Madras. Sri S. Bapu, T.R.S. who was then Officer in charge of the circle dealt with the case. The case was taken up for discussion by Sri Bapu, some time in June/July 1971. Soon after that a meeting took place between the assessee and the Commissioner of Income-tax (Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g already agreed terms of settlement between Shri R.V. Ramaswamy for the department and the partners on behalf of the assessee-firm. There was no necessity for filing multiple petitions during the course of settlement no need for prolonged discussion for a considerable length of time. The record in this case shows that the proposals which began on 9-10-1971 upon petition filed on behalf of the assessee-firm before the Income-tax Officer, Central Circle, dragged on till 26-3-1973, when two partners of the assessee-firm agreed for the terms of the settlement dated 20-3-1973. Even during the course of settlement proceedings or at a stage where the settlement did not take a concrete shape and even before the terms were completely agreed upon, Shri R.V. Ramaswamy, the then Commissioner of Income-tax, Madras, died on 14-7-1972. From the state of records we hold that by the date of his death even the minutes of settlement were not drawn up. They were drawn up only on 29-9-1972, about two months after his death. There are several points of variance in the proposals made between the assessee on the one hand and the department on the other hand. If we read the petition dated 9-10-1971 it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case or grounds of appeal filed before the Appellate Assistant Commissioner for the assessment years 1966-67 to 1970-71. However, the above quoted submission of the Revenue, which was mostly legal, was placated and taken advantage of by the assessee. Since then the assessee began contending that the assurance given by Shri Ramaswamy was only oral and not in writing. The assessee immediately wanted to make much out of this slur on the part of the department by putting forth the following plea in its written submission dated 20-9-1976, which was filed in reply to the departmental submission dated 6-9-1976. The written submission dated 6-9-1976 was also extracted at para 9 of the Tribunal's order dated 17-1-1977 and it is found at page 37 of the paperbook filed by the assessee : " The departmental note in fact begs the question. Only because of the fact that the assurance held was oral this situation has arisen. Therefore the department ought to have verified from its officers whether the fact of the holding out the assurance was true or not. The department has not taken sufficient steps to apprise the Hon'ble Tribunal of the entire facts of the case ". In a point by point reply fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of para 6 of the reply dated 30-11-1976 extracted above would not clearly establish the oral assurance given by Shri R.V. Ramaswamy. It only shows that during the course of settlement proceedings so many proposals and counter proposals would come up for consideration and offers and counter offers also would be made by the parties to the settlement and those proposals as well as the offers and counter offers being transitory in nature are bound to remain oral. But when they are accepted by the party to whom they are put and thus when there is a clear agreement about a proposal or an offer only such proposals and offers would likely to be recorded as a term of settlement, which would be reduced to writing. Therefore, mere offers made during conversation or proposals made by one party to the other in the settlement proceedings prior to the actual settlement was reached between them cannot be termed to be admissions. In this regard the provisions of section 23 of the Evidence Act are worthy to be considered, which are as follows : " In civil cases no admission is relevant if it is made either upon an express condition that evidence of it is not to be given or under circumstances fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offer were all fulfilled by the assessee-firm, nothing would have prevented the department to enter it as a term of settlement. 9. The theory that Shri R.V. Ramaswamy, the then Commissioner, orally held out or assured the assessee that he would not prosecute the partners of the assessee firm under section 277 of the Income-tax Act does not appear to be correct. No rational answer would be available for the questions what are reasons which compelled the parties to allow the all important assurance to remain as a mere oral understanding and why not this pivotal condition put forward in any one of the petitions filed by the assessee prior to the settlement. If the oral assurance by Shri Ramaswamy is real, nothing would be simpler than inviting the attention of the Commissioner of Income-tax, to that all important fact in any one of the petitions dated 9-10-1971, 1-11-1971 and 2-2-1972, which were all prior to the settlement dated 20-3-1973. The minutes of the settlement proceedings were recorded after the death of Shri R.V. Ramaswamy (14-7-1972) on 29-9-1972. Copy of the minutes was marked as Item No. I filed by the department and at pages 92 and 93 of the assessee's paperbook. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only with prosecution under section 193 IPC, but it does not concern itself with the prosecution under section 277 of the Income-tax Act, since it was already assured that no such prosecution would take place. But there is nothing in the term of the settlement itself to support this case of the assessee. Further this contention does not fit in with the earlier version of the assessee that the assurance given by Shri R.V. Ramaswamy was only oral and not written. We are of the view that the contents of the settlement should not be read in an isolated manner but they should be read in conjunction with the notes of settlement dated 29-9-1972 and also the acceptance letter dated 26-3-1973. At para 8 of the settlement of terms it is stated as follows : " Before finalising the assessments and other proceedings as per instructions given above, the Income-tax Officer is requested to get an undertaking in writing from the assessee agreeing to the above proposals, duly signed by all the partners constituting the firm ". Perhaps in order to fulfil the condition mentioned above two of the partners of the assessee-firm, representing the said firm gave their consent for settlement by their lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. Further the Tribunal proceeded on a wrong presumption that the matter relating to non-prosecution under section 277 does not appear to have specifically come up for discussion subsequent to the demise of Shri Ramaswamy. In our view there is no justification for this assumption or the finding in view of the notes on minutes dated 29-9-1972. The said notes clearly state that the consideration of prosecution both under IPC as well as IT Act was deferred for the present. These notes were prepared only subsequent to the death of Shri Ramaswamy. So unless the question of prosecution under the Income-tax Act was very much running and it was the burning topic in the minds of the officials of the Revenue it would not have figured in the notes of settlement dated 29-9-1972. Further the Tribunal gave much importance or the whole importance to the alleged belief entertained by the assessee about the prosecution under section 277 of the Income-tax Act. It never tried to find out whether the belief entertained by the assessee was true in fact and whether the assurance given about non-prosecution under section 277 of the Income-tax Act is proved as a fact. The Tribunal was concerned itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order is given effect to and only gives its decision subsequently when the finding or report called for in the remand order has been received and considered. In these circumstances, the view expressed at an earlier stage of the case, which has not yet been decided by the appellate court, do not bind that appellate court when giving its final decision ". In our view this ratio of the Allahabad High Court fully applies to the facts before us. The order dated 17-1-1977 of the earlier Tribunal dealt with the question whether the delay caused in filing the appeals (530 days) should be condoned or not. The decision on a delay excuse petition is similar to an interlocutory proceedings or similar to a remand order under Order XLI, rule 25 of CCP. Therefore, whatever decision the earlier Tribunal might have given and whatever was found about the bona fide belief entertained by the assessee about the assurance of non-prosecution under section 277 of the Income-tax Act it should be taken only as a view expressed at the earlier stage of the case, which does not bind the appellate court while giving its final decision. Therefore, according to the ratio of the above decision whatever view migh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll Bench decision of the Madhya Pradesh High Court was dismissed, that by itself was not taken to be final and that was the point which the learned departmental representative brought to our notice. Suffice it for us to say that this decision of the Hon'ble Supreme Court also supports our decision on this point. 13. The next question to consider is the validity of reopening under section 147(a). The assessee contends that the reopening under section 147(a) is not correct. The assessee's contention in this regard may be summarised as follows. The assessments for the assessment years 1966-67 to 1970-71 were all completed even before 23-1-1971 when the search of the business premises of the assessee took place by the Directorate of Inspection, Madras. In that search no valuables like cash or jewellery were seized by the department. Some account books relating to the assessment year 1971-72 were seized, which according to the department were duplicate sets of accounts. There was some difference in the opening balance noticed in those books and the closing balances of the books which were already disclosed to the department for the assessment year 1970-71. The differences between thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subsequent letters directed to the Board he stated that the assurance given was only in the nature of an offer and it does not amount to a term of settlement. After hearing froms S/Shri Bapu and Balakrishnan the assessee's petition filed before the CBDT not to prosecute the partners of the firm under section 277 of the Income-tax Act was rejected and a communication dated 29-8-1974 was given to the assessee firm by the CBDT in that regard. This according to the assessee amounted the whole of the package of settlement falling through and giving it a right to file appeals against the reassessments for the assessment years 1966-67 to 1970-71 as well as a right to appeal against the penalty order for the assessment year 1970-71. Thus the assessee firm preferred quantum appeals for the assessment years 1966-67 to 1970-71 and penalty appeal for the assessment year 1970-71 before the Appellate Assistant Commissioner with a delay of about 530 days. The appeals were dismissed as time barred. Against that dismissal order the assessee came before the Tribunal in ITA Nos. 2455 to 2459 (Mds)/1974-75 as regards the quantum appeals for the assessment years 1966-67 to 1970-71. As against the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed only in the assessment year 1971-72 and that too in the hands of the partners in their individual assessments. To successfully invoke jurisdiction under section 147(a) two conditions must be fulfilled --- (i) reason to believe that income escaped assessment and (ii) that the income escaped assessment was due to omission or failure of the assessee to disclose fully and truly the income for that assessment year. It is submitted that there was hardly any material sufficient for the Income-tax Officer to form a reasonable belief that the impugned amount escaped assessment in the assessment years 1966-67 to 1970-71. In the reasons recorded both these aspects were absent. Under law the recorded reasons must not be vague. If they are vague, they do not give rise to jurisdiction under section 147(a). In support of this proposition Shri Kumbhat, the learned chartered accountant for the assessee, relied on the Bombay High Court decision in Technocraft Industries v. G.S. Tung, Second ITO [1990] 185 ITR 465. It is contended that except the income-tax return filed by the assessee no other reason was recorded for reopening. It is stated that from July 1971 to November 1971 the settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, which were noted at pages 98 and 99 as follows : " Comments on material placed by the departmental Representative : (a) This is an, uncorroborated statement. No further examination of partner Shri Chaganlal was carried out to ascertain the true facts. The statement has no value at all. In any event, there is no definite material to show that income chargeable to tax had escaped assessment within the meaning of section 147(1)(c) of the Income-tax Act, 1961. (b) The entire questions and answers relate to the assessment year 1971-72. There is no material in this page to indicate that income for the assessment years, viz., 1966-67 to 1970-71 had escaped assessment. (c) This is the assessee's letter dated 9th October, 1971 wherein at the penultimate paragraph it was pointed out that the opening balance in partners' accounts for the assessment year 1971-72 was different from the closing balance for the assessment year 1970-71. It was also explained in the last para that the difference arose in the partners' accounts on account of private borrowals by the partners. This cannot lead to the conclusion that the firm had earned income and also cannot lead to the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66-67 to 1971-72 which were all made on 31-3-1973 are agreed assessments, against which no appeals lie and in support of this proposition the learned departmental representative relied on the Madras High Court decision in Ramanlal Kamdar v. CIT [1977] 108 ITR 73 and the Kerala High Court decision in CIT v. Cochin Malabar Estates Industries Ltd. [1989] 180 ITR 152. 16. On behalf of the assessee it is contended that the rule of promissory estoppel comes to the rescue of the assessee in this case and by dint of the principle of law applying to the assessee's case it should be deemed that as soon as the settlement terms were broken, the assessee is also relieved of the terms of settlement, if any, agreed upon by the assessee and the department. In support of this proposition the learned chartered accountant of the assessee relied on certain decisions, which would be discussed later. This contention was also opposed vehemently by the learned departmental representative, who argued that this rule of promissory estoppel does not operate at all in this case. There would not be any estoppel against the statute. Estoppel operates between man and man and not between man and the State. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a reasonable belief that income escaped assessment for the assessment years 1966-67 to 1970-71 and thus there was no justification for reopening under section 147(a). After going through the several documents and after evaluating the arguments advanced on either side on the subject and having due regard to the case laws on the subject we hold that this contention of the learned representative of the assessee cannot be accepted. 18. The assessee firm is following the Diwali year. The accounting period relevant to the assessment year 1968-69 was from 13-11-1966 to 2-11-1967. The accounting period relevant to the assessment year 1969-70 was from 3-11-1967 to 21-10-1968 and the accounting period relevant to the assessment year 1970-71 was from 22-10-1968 to 9-10-1969. On 23-1-1971, which is the date of search, the ADI(I), Madras, had examined the available partners of the firm, viz., Shri Banwarilal Jain. Even prior to his examination, Sohanlal, the Munim of the assessee firm was examined who clearly stated that the seized books and slips which were seized from the Godrej cupboard of the assessee firm, disclosed suspense sales, which were omitted to be noted in the books produced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of examination of Shri Banwarilal Jain on 27-9-1971 was recorded at pages 76 and 77 of the paperbook. This examination would further corroborate that there was fabrication of accounts for the assessment year 1970-71 and all the sales effected by the assessee firm were not reflected in the ledger filed before the income-tax authorities for that assessment year. The assessee had filed petitions dated 9-10-1971, 1-11-1971 and 2-2-1972 in the course of the settlement proceedings which contain its own proposals and also the acceptance of the proposals made by the department. It is admitted that the difference between the opening credit balances as on-10-11-1969 found in the names of Bhawarlal Gothi, Chaganlal Jain and Ghisulal Kothari and the closing balances as recorded in the accounts of these very partners as on 9-11-1969 was Rs. 6,60,660. Out of this amount a sum of Rs. 73,448 was shown as balance standing in the respective names of those partners in the income-tax statements filed in connection with the income-tax assessments of the assessee firm and also a sum of Rs. 49,611 was shown in the income-tax returns filed by Kothari Credit Corporation. However, the balance of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs. 79,000 is assessed irk the year 1970-71 as arrived at in the annexure or such amount depending upon income fixed for 1971-72. The workings shown in the annexure would make it clear that the said basis is reasonable. The balance of the amount of Rs. 5,08,000 or such amount which may work out as per the working shown in annexure may be spread over equally and assessed for the years 1966-67 to 1969-70. We submit that such an equal spread over is justified even though there has been a slight variation of the turnover in view of that fact that there are no special reasons relating to any particular year resulting in large profits in that year compared to the other years. There has been no peculiar feature in the trade justifying such an inference ". In the minutes prepared by the Inspecting Assistant Commissioner on 29-9-1972 it is stated that the spread over as per the working given in the assessee's letter dated 2-2-1972 was agreed by the department and therefore it is clear that the total of the escaped income and its, spread over for the assessment years 1966-67 to 1970-71 were agreed upon by the assessee as well as by the department. The first and the second terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of the firm is Rs. 10,000 : " The fact remains that there is no other material to show that Shri Ghisulal was a partner of the firm. In any case we submit that there is no motive in having Shri Labchand as his benami. The maximum tax effect if Shri Ghisulal is taken as partner in the place of Shri Labchand would be less than Rs. 10,000, even on the basis of the revised figures of income proposed by the Income-tax Officer." By the settlement arrived at with the department the assessee derived this benefit. 20. Having derived all the above benefits from out of the settlement and having allowed the department to agree for the representations made by the assessee firm, would it be permissible for the assessee-firm now to turn against the settlement and plead that it would not be bound by the settlement terms ? In our opinion and in view of the ratio of the Bombay High Court decision in CIT v. Army Navy Stores Ltd. [1957] 31 ITR 959, the assessee is not permitted to do so. In that case the following is what is held at pages 965 and 966 : " Now the most significant and outstanding fact in this reference is that the assessee-company obtained a particular benefit and escaped a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 147(a) is bad under law. 21. In our opinion items A to K filed by the department constitute material on which the reopening can be validly made. Further the income-tax returns which were filed by the assessee itself in pursuance of the settlement reached with the department can as well form part of the material justifying reopening under section 147(a). It is no doubt true that the assessee is entitled to prove that the admission made by it is vitiated inter alia by misrepresentation, false promises, etc. We have elaborately discussed this aspect and held in prior paragraphs that the settlement arrived at by the assessee with the department is not vitiated by any misrepresentation or false promises, etc., and in fact we have recorded a finding that the alleged assurance given by the department about non prosecution of the assessee under section 277 of the Income-tax Act is not at all proved and is not substantiated. In view of our finding it should be taken that the income-tax returns filed in the reassessment proceedings amount to admissions made by the assessee, which admissions were not vitiated by any of the vitiating factors and therefore the income-tax returns were fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court decision does not help the assessee and it is also distinguishable on facts. In fact, nowhere the ratio which is sought to be deduced from the Madras High Court decision by the assessee in this case was laid. down by it. In that case for the assessment year 1952-53 return dated 30-6-1951 was filed showing an income of Rs. 11,406 from business. In arriving at the income the assessee took in to account a sum of Rs. 22,767 alleged to be booking commission due from another concern, Presidency Talkies Ltd. On 17-11-1954 the assessee filed revised return claiming a loss of Rs. 11,361 on the footing that the sum of Rs. 22,767 which was originally shown as income receipt was not income as the amount was not received at all. The Income-tax Officer computed the total income of the assessee on the basis of the first return submitted by it. Before the Appellate Assistant Commissioner it was contended that this amount of Rs. 22,767 should be excluded from the income of the assessee and even if it is treated as income it was exempt under section 3 of the Finance Department Notification dated 21-3-1922. The Appellate Assistant Commissioner negatived both these contentions. The appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oke Kumar Scn v. ITO [1981] 132 ITR 707 (Delhi) 7. Ved Parkash Prabhudayal Agarwal v. ITO [1982] 135 ITR 756 (Bom.) 8. Purushottam Das Bangur v. ITO [1980] 126 ITR 580 (Raj.) 9. S.B. Muthumunia Mudaliar v. CAIT [1972] 85 ITR 12 (Mad.) 10. R.S. Chiranji Lal Sons v. CIT [1959] 36 ITR 407 (Punj.) 11. CIT v. A. Raman Co. [1968] 67 ITR 11 (SC). The decisions of all other High Courts which were delivered subsequent to Lakhmani Mewal Das's case, followed the said decision of the Hon'ble Supreme Court and hence we will have to see what is the ratio in Lakhmani Mewal Das' case. As far as the ratio of this decision is concerned it is found stated at pages 445 and 446, which is as follows : " The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undisclosed income of the assessee. The assessee is still claiming that the credits are genuine in the assessment proceedings for 1962-63. Commissioner's sanction is solicited to reopen the assessment for 1958-59, under section 147(a)." The Hon'ble Supreme Court held that simply because there was some information that Narayansingh Nandalal, D.K. Naraindas and Bhagwandas Srichand were known name-lenders it does not necessarily lead to the conclusion that the credits given to the assessee are bogus. So also the Supreme Court held dealing with the confession given by Mohansingh Kanyalal that there was nothing to show that the above confession related to a loan to the assessee and not to someone else, muchless to the loan of Rs. 2,500, which was shown to have been advanced by that person to the assessee. There was also no indication as to when the confession was made and whether it relates to the period from 1-4-1957 to 31-3-1958, which is the subject matter of assessment sought to be reopened.The report was made on 13-2-1967. In the absence of the date of the alleged confession, their Lordships held that it would not be unreasonable to assume that the confession was made a few week ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as income of the assessee firm for the assessment years 1966-67 to 1970-71. This material cannot be said to be vague material. The ledger is admitted to be belonging to the assessee-firm. The settlement proceedings were never disputed. The terms of the settlement are also not disputed. We have already held that no assurance was given by Shri R.V. Ramaswamy that the partners of the assessee-firm would not be prosecuted under section 277 of the Income-tax Act and therefore the settlement reached with the department was not at all vitiated by either mistake of fact or mistake of law or misrepresentation, coercion, fraud, undue influence, etc., and the said settlement is fully binding against the assessee. In these circumstances we hold that there is sufficient material which can give rise to a reasonable belief to the Income-tax Officer that the assessee failed to furnish all material facts relevant for the assessment years 1966-67 to 1970-71 when the original assessments were made and further the income liable for assessment escaped assessments for those years. 24. None of the other decisions cited on behalf of the assessee would apply to the facts of the case and they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. In Equitable Investment Co. (P.) Ltd.'s case it was held that the reasons as recorded for reopening which were forwarded to the Commissioner were not sufficient to enable the Income-tax Officer to reopen the assessment. On that ground the notice issued under section 148 was held to be not valid. Here again the facts of the case are quite distinguishable from the facts on hand and therefore the ratio of the Calcutta High Court does not apply to the case on hand. 28. So also in the Delhi High Court decision in Asoke Kumar Sen's case for the assessment year 1962-63 the assessee was assessed to tax on salary income of Rs. 30,300, property income of two-thirds of Rs. 9,000, interest on Rs. 2,795 and professional and royalty income of Rs. 8,005. A notice for reassessment was issued under section 147(a)/148 of the Income-tax Act for bringing to tax income escaping assessment. The assessee filed a writ petition challenging the notice on the ground that there was no material for the issue of notice. In the said writ proceedings the Income-tax Officer filed a counter-affidavit stating that he was of the opinion that inasmuch as the preceding years, personal and household expenses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court and also did not controvert the averments made in the writ petition. Further from the facts it was found by the High Court that for the assessment year 1973-74 the Tribunal gave a finding that despite the stay granted not to proceed with the notice of reopening under section 148, the income-tax authorities issued fresh notice for the assessment year 1973-74 on March 20, 1978, in pursuance of which ' proceedings were commenced by the Income-tax Officer and ultimately on merits it was found that the income of the trust had not escaped assessment for the assessment year 1973-74. This finding was affirmed by the Tribunal, which also indicated that the notices issued under section 148 by the income-tax Officer were not valid. Therefore, the facts of the present case are quite different from the facts of the Bombay case and, therefore, that decision does not apply to the facts of this case. 30. In the Rajasthan High Court decision in Purushottam Das Bangur's case when the original assessment was made the loss resulted on the sale of shares of MSU Mills Ltd., was ascertained and the value of the shares was adopted according to the rates quoted in the Calcutta Stock Exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from the ratio which we follow while deciding the issue before us. 32. The decision of the Hon'ble Supreme Court in A. Raman Co.'s case. was also cited. However, that was a decision concerning itself with the reopening made under section 147(b) but not under section 147(a) and, therefore, we need not elaborately consider the said case while disposing of the present case. Suffice it to say that the ratio of that decision does not apply to the facts of the case. 33. The learned departmental representative contended that since the assessee-firm itself had filed the returns voluntarily in the reassessment proceedings and since the reassessments were made consequent upon the liability thereunder, having been admitted by the assessee itself, for the assessment years 1966-67 to 1970-71, there cannot be any appeals permitted against such admitted assessments and in support of his proposition that no appeals lie against admitted assessments, the learned departmental representative relied on the following decisions : (1) Ramanlal Kamdar's case and (2) Cochin Malabar Estates Industries Ltd.'s case. It was contended that the dismissal of the appeals by the Commissioner (Appeals) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of rectification was made by the Income-tax Officer. However, the assessee filed an appeal against the order of rectification before the Commissioner (Appeals), which was allowed in part. The Revenue filed an appeal before the Tribunal contending that the appeal filed by the assessee before the Commissioner (Appeals) itself was incompetent. The decision of the Tribunal went against the Revenue. In reference at the instance of the Revenue the Hon'ble High Court held the following as per the headnote at page 153. " Held, that the appeal filed by the assessee before the Commissioner (Appeals) itself was incompetent regarding the allocation of overhead charges in rectification proceedings since the assessee could not be considered to be a ' person aggrieved ' by the order passed under section 154 by the Income-tax Officer. Therefore, the order passed by the Income-tax Officer would stand and the Tribunal was not right in affirming the decision of the Commissioner (Appeals) which interfered with order of the Income-tax Officer rectifying the assessment regarding the allocation of overhead charges." Therefore, in view of the abovesaid two authorities, with which we fully agree and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said to have been vitiated by misrepresentation, fraud, undue influence or by mistake of fact or mistake of law. Therefore, on facts the equitable principle of promissory estoppel, in our opinion, is not available to the assessee-firm. The theory of promissory estoppel is of recent origin and its development is still in the making. The scope of the doctrine was enunciated by the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326. At pages 342 and 343 of the reported decision the following is what is stated about promissory estoppel : " The true principle of promissory estoppel, therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 277 of the Income-tax Act is quite different from allowing the assessee itself to resile from the terms of the settlement, duly entered into, by it on 20-3-1973, and consented to it by it on 26-3-1973, on the ground that the Revenue went against the promise made to it in a particular regard. It is no doubt true that the assessee was prosecuted by the Revenue in C.C. No. 20439 of 1974 on the file of Chief Metropolitan Magistrate, Egmore, Madras. Copy of the judgment dated 19-8-1975 was filed before us, which is numbered as pages 8 and 9 of the paper book filed on behalf of the department. We have perused the judgment dated 19-8-1975. It is gathered from the said judgment that the accused was prosecuted for offences under section 193 of IPC, read with section 120B of IPC. All the three partners of the firm, namely, Chaganlal Jain, Bawarlal and Labchand Kothari and their Munim Sohanlal were made accused in that case. It is no doubt true that each of the accused was convicted to suffer imprisonment till the rising of the court and each of them was fined Rs. 2,000 in default to suffer RI for three months for the offence under section 193 of IPC. It is very clear from the judgment th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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