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TMI Blog2016 (7) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... pon by the petitioner and the objections to be raised to decide the matter. It is indicated by the Revenue that the petitioner played a key role in controlling the decision making process which ultimately led in eliminating all other companies, shortlisting the two companies in question and it has been held that by acting as intermediate between Nagar Nigam and Commissioner of Urban Administration and Development, the petitioner was indicated in various steps pertaining to award of contract. Therefore, merely, because it is said that the petitioner had gone on deputation he cannot be exonerated of the charges levelled. That being the reason which weighed with the Revenue authorities to proceed further in the matter, therefore, it is not appropriate for a writ court exercising limited jurisdiction in a petition under article 226 of the Constitution at this stage to interfere as enquiry into various aspects of the matter which was the prime consideration which weighed with the Revenue for proceeding in the matter may be required. The Revenue on a just and proper consideration has taken the decision and therefore, we are not inclined to accept this contention advanced by Shri Kish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Principal Secretary, Transport Department. However, it is the case of the petitioner that he received the impugned notice annexure P-1 on March 27, 2014 issued under section 148 of the Income-tax Act, wherein respondent No. 1 indicated to the petitioner that he has reasons to believe that the petitioner's income with respect to the assessment year 2009-10 has escaped assessment within the meaning of section 147, therefore, it was proposed to assess/reassess the income for the said assessment year. The petitioner was required to submit his return in the prescribed form for the said purpose. In response to the same the petitioner vide letter annexure P-2 on April 15, 2014, requested for certain material. It is said that the petitioner did not receive any reply to the same and when the petitioner was awaiting reply to annexure P-2, so also the reasons for reopening of assessment, he received another notice on January 13, 2015 under section 142(1) calling upon him to submit his return to the impugned action/reopening the assessment. It is said that vide annexure P- 4 dated January 15, 2015 the petitioner responded and pointed out that originally return has already been filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 267 P 1.25% 3.33 267 C % 1.335 267 M 1% 2.67 267 - % 1.335 4. It was said that listing as indicated hereinabove depicts the vertical chain of Government hierarchy involved in the allotment of Indore Sewage Project and in this, the figure M denotes for Minister of Urban Development, P the Principal Secretary, Urban Development Department, M the Mayor and C is said to be referring to the Commissioner, for Urban Administration. It was further said that in the search conducted in the premises of Mr. Mukesh Sharma, certain documents have further been seized which goes to show that illegal gratification were also paid to the petitioner by M/s. Simplex Infrastructure. Indicating that the Deputy Commissioner, Income-tax has reasons to believe that the petitioner as Commissioner, Urban Administration Development in the year in question, received illegal gratification to the tune of ₹ 2.21 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indore after due approval of the Mayor-in-Council, it was said that the petitioner had no role to play in award of the contract. The petitioner with facts and figure submitted a detailed objection and when the objection was not decided and notices issued for proceeding with the matter, this writ petition was filed. However, while the writ petition was pending, vide annexure P-13 dated March 19, 2015 objections of the petitioner were rejected and it had been held that the petitioner was a key person engaged in controlling the decision making process for award of contract to both these companies and as he was the intermediary between the Municipal Corporation and the Urban Administration Department based on the notings made in the papers seized and reproduced hereinabove, it is held that figure C appearing in the slip denotes the Commissioner, Department of Urban Administration and as the petitioner has received illegal gratification which is nothing but income for the assessment year and as the same has escaped assessment, the proceeding has been held. 5. Shri Kishore Shrivastava, learned senior counsel appearing for the petitioner took us into the factual aspects of the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the petitioner was in any way connected with any award of the contract or the work to the contractors in question. Shri Shrivastava also invited our attention to annexure P-15 dated February 12, 2015, the communication made by the Deputy Commissioner of Income-tax to the Principal Secretary, Department of Urban Administration, whereby the Income-tax Department sought for certified copy of the relevant file, figures, order sheet, minutes of the meeting with regard to award of the contract to both the companies M/s. Nagarjuna Construction Co. Ltd. and M/s. Simplex Infrastructure Ltd., reply of the Government to the same filed as annexure P-17, dated February 18, 2015 and February 19, 2015, wherein the Government had informed the Income-tax Department that the entire contract is awarded by the Indore Municipal Corporation, records are with the Indore Municipal Corporation, the Urban Administration and Development Department in the Government of Madhya Pradesh has got nothing to do with the award of contract, therefore directions were issued by the Government of Madhya Pradesh through the Commissioner, Municipal Corporation to handover all the documents to the Income-tax Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), Madhya Pradesh Industries Ltd. v. ITO [1965] 57 ITR 637 (SC), Madhya Pradesh Industries Ltd. v. ITO [1970] 77 ITR 268 (SC), Sheo Nath Singh v. AAC of I. T. [1971] 82 ITR 147 (SC), Arjun Singh v. Assistant DIT (Investigation) [2000] 246 ITR 363 (MP), Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), G. Sukesh v. Deputy CIT [2001] 252 ITR 230 (Ker). 7. Primarily, to say that the reason to believe which is a prime requirement for initiating the proceeding under section 147 read with section 148 being not available in the present case, the entire proceedings are liable to be quashed. Apart from emphasizing on this aspect, he also made submission with regard to the procedure to be followed, the power of the Income-tax Officer and various other aspects of the matter which we will deal with as and when required at a subsequent stage. 8. Shri Sanjay Lal, learned counsel appearing for the Revenue refuted the aforesaid contentions and argued that at this stage as the assessment proceedings are in progress and when only the return filed by the petitioner is being scrutinized, as certain material has been received in the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise. It is argued, based on the said judgment that as no assessment order has been passed or as the assessment is not completed, the case in hand is covered by the main provisions of section 147 and not the proviso to section 147 and as the condition necessary for bringing the case under the main proviso of section 147 is in existence and Assessing Officer has formed the opinion based on the material which are available, interference into the matter at this stage is not called for. He relied upon following judgments in support of his contentions to say that at this stage interference into the matter is not called for CIT v. Vijaybhai N. Chandrani [2013] 357 ITR 713 (SC) ; [2013] 85 CCH 191 (SC), Joint Commissioner v. Kalanithi Maran [2014] 366 ITR 453 (Mad) ; [2014] 89 CCH 152 (Mad), EMA India Ltd. v. Asst. CIT [2009] 226 CTR (All) 659, Bhajan Lal v. CIT [2001] 250 ITR 399 (P H) ; [2001] 169 CTR (P H) 287, W. P. No. 8173 of 2009 Satish Vishwakarma v. Asst. CIT decided on April 13, 2010, G. Sukesh v. Deputy CIT [2001] 252 ITR 230 (Ker) ; [2001] 169 CTR (Ker) 39, Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) ; [1999] 152 CTR (SC) 418 and Asst. CIT v. Rajesh Jhaveri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the condition precedent for assumption of jurisdiction under section 34, if not satisfied, then there is no reason to refuse a proper relief in a petition under article 226 of the Constitution. Section 34 was considered in detail and the import and meaning of the words reason to believe was taken note of and the principle laid is that the opinion formed by the Income-tax Officer should be based on cogent and substantial material which makes the Income-tax authority feel that the requirement of the condition precedent is made out. This case was thereafter, again considered in the case of Rai Singh Dev (supra), wherein the hon'ble Supreme Court has emphasised that before issuing a statutory notice under section 34(1)(a), the Income-tax Officer must have reason to believe that by reasons of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the year in question, some income, profit or gain chargeable to Income-tax has escaped assessment. It has been held in this case that existence of this pre-condition is an extremely important circumstance which is required to be satisfied to enable exercise of jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest of the assessee should not be based on irrational or irrelevant consideration, it should be based on objective and relevant material and merely on the ipse dixit of the officer on vague, farfetched fanciful, remote information or allegation is not sufficient. It is held that there should be clear nexus between the material and the reason to believe. Accordingly, on a complete reading of the case law in extensio cited by Shri Kishore Shrivastava before us, we find that most of the cases deal with two aspects, first, the jurisdiction available to this court in such matters under article 226 of the Constitution and the principles to be followed for recording a finding to say that the condition precedent for coming to the conclusion that the Assessing Officer has reasons to believe exists are laid down. 11. Accordingly, we find that the question of reasons to believe as contemplated under section 147(a) has to be determined on the basis of the material available on record. Shri Kishore Shrivastava, learned senior counsel referred to the material, primarily the noting in the diaries and the loose papers to say that they are not sufficient enough to hold that there are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the asses see notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the asses see concerned. Between April 1, 1998 and May 31, 1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word 'intimation' as substituted for 'assessment' that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is pay able by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any 'assessment' is done by them? The reply is an emphatic 'no'. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise. (emphasis supplied) Finally, after taking note of the provisions of sections 148 and 147 and its amendment from time to time in para 16, the matter has been dealt with in the following manner (page 511 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively prove the escapement or not is not of concern at this stage. If this be the principle of law as laid down by the Supreme Court with reference to the matter, we have no hesitation in holding that objection raised by the Revenue in the matter of interference at this stage has much force. In fact, in the judgment rendered in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), the words intimation and assessment used under section 143 in different places is considered to be with reference to different context and in the judgment the final conclusion is that if the assessment has not been completed, accuracy and sufficiency of the material should not be examined. This also is the principle laid down in the case of Raymond Woollen Mills Ltd. (supra) relied upon by Shri Sanjay Lal. The Kerala High Court in the case of G. Suresh, the Punjab and Har yana High Court in the case of Bhajan Lal have also laid down identical principle. In fact in para 8 of the judgment rendered by the Punjab and Haryana High Court in the case of Bhajan Lal (supra), reference is made to a judgment of the Supreme Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) ; [1993] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, if on the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. . . .' One of the purpose of section 147 appears to us to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would be a travesty of justice to allow the assessee that latitude. (emphasis supplied) 13. If we analyse the facts of the present case in the backdrop of the aforesaid legal principle, we find that the petitioner wants this court to hold that the material collected by the Department and relied upon, namely the entries/notings made as indicated in the loose slip has no nexus to the petitioner and therefore, the entire proceeding should be quashed. Whereas, the Revenue wants this court to hold that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Shri Kishore Shrivastava, learned senior counsel that the entire process of awarding the contract and its finalisation was undertaken after the petitioner had left on deputation to the Government of India. This aspect of the matter has been considered by the Revenue in the detailed reason given for proceeding further in the matter and they have indicated in the said reasons that when the petitioner was holding the post of Commissioner Urban Administer and Development in M.P., various process in pursuance to the tender earlier issued and subsequently issued on modification took place and shortlisting of the two contractors, namely, M/s. Nagarjun Construction Company, Hyderabad and M/s. Simplex Infrastructure Ltd., Calcutta and after declaring them to be qualified till the stage of technical bid was undertaken by modifying the terms and conditions of the tender documents and certain process was also undertaken for eliminating the other companies and this process played a vital role in the ultimate award of contract. It is indicated by the Revenue that by following these processes a final decision provisionally was already taken for awarding the contract to these parties and as all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 718 of 357 ITR) : In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not have entertained the writ petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the assessing authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act. In view of the above, without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on section 153C, we set aside the impugned judgment and order. Further, we grant time to the assessee, if it so desires, to file reply/objections, if any, as contemplated in the said notices within 15 days' time from today. If such reply/objections is/are filed within time granted by this court, the assessing authority shall first consider the said reply/objections and thereafter direct the assessee to file the return for the assessment years in question. We mak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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