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TMI Blog2008 (8) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... seek a declaration that the notices dated 13-12-1999 issued by the respondents are illegal, null and void and they seek a further relief by exercise of appropriate writs of quashing and setting aside the same. 2. The facts which are not in dispute are that the petitioners are assessees and their income is assessed to income-tax. These are cases of petitioners being individual assessees. Their individual returns for the assessment years 1989-90 to 1997-98 were scrutinized. We are not concerned in this case with the assessment of income when the petitioners carry on business as partners of a partnership firm. This is a case of their individual returns of income being involved. 3. It is further undisputed before us that from 16-10-1996 to 20-10-1996, a search was conducted at the residence of late Anant N. Naik and his family in exercise of the powers conferred by section 132 of the Income-tax Act, 1961. The assets were seized. His statement was recorded during the course of the said investigation on 20-10-1996. 4. Between 16-1-1997 to 30-12-1997, assessment proceedings before the Assessing Officer, Dy. CIT (Asst.) Special Range, Panaji, were held and pursuant thereto, he passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be put up after the disposal of the subject appeal and, in the meantime, no final order shall be passed under section 148 of the Income-tax Act in the proceedings pursuant to the show-cause notice. 9. The matter thereafter came to be placed on 28-3-2000 (sic) and after hearing the parties, this Court admitted the petition and granted an interim order in terms of the earlier order dated 10-4-2000 to be effective till the hearing and final disposal of this writ petition. 10. The further factual position emerging from a perusal of the annexures to the petition is that the notices dated 13-12-1999 (impugned notices) read thus : "Whereas I have reason to believe that your income/chargeable to tax for the assessment year 1989-90 has escaped assessment within the meaning of section 147 of the Income-tax Act. I, therefore, propose to reassess the income for the said assessment year and hereby require allowance under section..... You deliver to me before the expiry of 31 days from the date of service of this notice, a return in the prescribed form of your income for the said assessment year. This notice is being issued after obtaining the necessary satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without jurisdiction. He submits that the prerequisites for exercise of jurisdiction under section 147 are well-settled. Unless the same are satisfied, there is no question of the assessment officer reopening the assessment proceedings. He submits that the mandatory prerequisites are a guarantee against arbitrary exercise of powers by the authorities and the Department. It is a protection to the assessee inasmuch as assessment finalised cannot be reopened save and except in cases covered by section 147 of the Act. He submits that if the impugned notices are tested on the touchstone of the subject provision, it would be apparent that the notices have been issued by the Department to get over the adjudication by the Tribunal and finally by this Court. Mr. Nadkarni pointed out that the Department has lost throughout and even its appeal to this Court under section 260A of the Income-tax Act has been dismissed. In such circumstances and when block assessment orders gained finality, the impugned notices are nothing but an attempt to reopen them. Such attempts are impermissible in law much less by recourse to section 147 of the Income-tax Act. He submits that each of these notices are aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department was very much a party. In such circumstances, the order sheet does not indicate the necessary belief based upon which the powers were to be invoked. That apart, he submits that by no stretch of imagination, the record sheet can be termed to be a satisfaction contemplated by section 147. For all these reasons, he submits that the writ petition be allowed and the reliefs prayed for be granted. 14. Mr. Nadkarni relied upon the following decisions in support of his contention. Bhor Industries Ltd. v. Asstt. CIT [2003] 183 CTR (Bom.) 248, Ganga Saran Sons (P.) Ltd. v. ITO [1981] 130 ITR 1 1 (SC) German Remedies Ltd. v. Dy. CIT, Ajanta Pharma Ltd. v. Asstt. CIT [2004] 267 ITR 2002 (Bom.) and CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234 (SC). 15. On the other hand, Mr. Rivonkar, appearing for the revenue contended before us that the writ petition may have been entertained but no relief can be granted in favour of the petitioners. He submits that undisputed factual position is that the petitioners had filed returns and raised objections. The objections would be scrutinized by the Department. If the petitioners can very well satisfy the concerned officer and support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, was permissible, more so, the foundation of the same being the material gathered during the search and seizure. Therefore, two independent provisions have been resorted to by two independent authorities. Now, returns have been filed by the petitioners and the assessment will be duly done. Therefore, this Court should not grant any reliefs in favour of the petitioners, much less quash the impugned notices. For all these reasons, the petition be dismissed. 18. Mr. Rivonkar has relied upon the following decisions in support of the above contentions : Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 1 (SC), A.L.A. Firm v. CIT [1991] 189 ITR 2852 (SC) and ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC). 19. For properly appreciating the rival contentions, reference to section 147 of the Act would be necessary. The same reads thus : "147. Income escaping assessment. If the Assessing Officer has reason to believe that any 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 inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act has been computed." A bare perusal of the same would indicate that it is entitled "Income escaping assessment". The Assessing Officer has reason to believe that any income chargeable to tax escapes assessment for assessment year, then, subject to provisions of sections 148 to 153, the Assessing Officer can reassess or assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. 20. The proviso of the same has been relied upon by Shri Rivonkar to support some of the notices and he has contended that there is no question of the proviso becoming applicable to some of the notices which are issued within a period of four years. In other words, the failure on the part of the assessees to make the return under section 139 or in response to a notice issued under Explanation [sic-sub-section (1)] of section 142 or 148 or to disclose fully and truly all material facts is something which is germane to these notices which have been issued after four years have lapsed and such requirement cannot be read into the substantive provision namely section 147. 21. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Department having resorted to section 158BA to section 158BC of the Income-tax Act, it cannot be said that the income escaped assessment. In these proceedings the income was assessed and taxed after it was brought to the notice of the Assessing Officer. Merely because the block assessment was not upheld by the authorities under the Income-tax Act, it cannot be reason enough in this case to invoke section 147 of the same. The income has not escaped assessment in the admitted factual position. We are of the view that even the order sheet does not meet the requirement in law. The same merely sets out that the seized material and inquiries with the assessee at the time of search, reveal that the income as per particulars is unaccounted in the books of the seizure. Therefore, there is reason to believe that the income has escaped assessment. The reasons clearly show that there is no reference to any block assessment or the proceedings pursuant thereto. 24. Mr. Nadkarni s reliance upon a decision of the Division Bench of this Court is, therefore, well founded. The Division Bench was considering, inter alia, the argument that a writ petition under article 226 would not lie to ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach the Assessing Officer. That does not mean that the assessee is invariably bound to approach the Assessing Officer in each and every case. There can be the cases, like the one in hand, where he may be entitled to approach the Court directly under Article 226 of the Constitution of India." (p. 206) 25. The Division Bench made the above observations after referring to earlier decisions of this Court and the Supreme Court. In our view, the observations would fully apply to the facts and circumstances of the present case and we do not see any merit in the submission of shri Rivonkar that the reasons or the notices cannot be questioned because the petitioners have filed the returns in pursuance of the notices. The writ petition is already admitted and is listed before us for final hearing and disposal. The writ petition is filed in the year 2000 and, therefore, after its admission, it is too late to urge that the Court is precluded from entertaining the challenge to the notices on the ground of jurisdiction. 26. As far as the submission on the issue of jurisdiction, once again, we are fortified in our conclusion by the law laid down by the Division Bench of this Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the assessee to disclose fully and truly all material facts. Explanation 2 cannot be read without reading the proviso to section 147. Explanation 2(c) has to be read with section 147 including the proviso and, if so read, the above dichotomy would be clearly spelt out. In the present case, reopening is sought to be done beyond four years. In the present case, the assessee had filed its annual report before the Assessing Officer indicating spread over of Rs. 10,02,23,735 over a period of 60 months. The Assessing Officer acted on that report by granting deduction to the extent of Rs. 33,40,818 for the year ending 31-3-1996. In the circumstances, there was no failure on the part of the assessee to disclose fully and truly the material facts. In our view, the judgment of this Court in IPCA Laboratories case (supra) squarely applies to the facts of the present case." Some of the notices in the present case are issued admittedly after 4 (four) years. The Division Bench has observed that no action can be taken for reopening of assessment after four years unless the Assessing Officer has reason to believe that income had escaped assessment by reason of failure on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d do not comply with mandatory prerequisites. Hence, the decision in the case of Selected Dalurband Coal Co. (P.) Ltd. (supra) is distinguishable. In Raymond Woollen Mills Ltd. s case (supra), the argument was that there was no prima facie material before the Department. Once again, the factual position was noticed and the observations relied upon by Shri Rivonkar have been made. 30. The above decisions, therefore, turn upon their own facts. They are, therefore, distinguishable. 31. In our view, it is the attempt of the Department to somehow or the other reopen the proceedings and more particularly the block assessment which they could not successfully support and sustain right up to this Court. That this is the attempt which is apparent from the notices and, therefore, the reasons which are relied upon fail to indicate any escapement or concealment of income by the assessee or suppression of any material facts by him. Therefore, they do not meet the required satis-faction under section 147 of the Income-tax Act. In fact, this is an instance identical to the one before the Hon ble Supreme Court in the case of Rao Thakur Narayan Singh (supra). 32. On this ground alone, the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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