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TMI Blog2017 (1) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... r notice/order. As prayed for, by the learned counsel, these petitions were heard together and in principle, only facts of petitioner Sh. Virbhadra Singh (CWP No. 3072 of 2016), were argued before us, for the difference pertained to the amount of income declared and the dates of filing of returns under Section 139 of the Act. Hence we proceed to discuss the facts of CWP No. 3072 of 2016. 3. The issues, which this Court is called upon to consider, are: (a) whether an order passed by an authority under the Act, in view of availability of equally efficacious remedy, is amenable to interference by way of writ jurisdiction, (b) whether exercise of power by the jurisdictional authority, in initiating action for assessment of escaped income, is justiciable by a Writ Court, (c) whether the jurisdictional authority had sufficient material to form reasons of belief, (d) whether such reasons do exist and if so, can this Court go into sufficiency thereof, (e) whether sanction accorded by the appropriate authority is in accordance with law, (f) whether the order passed by the authority is in conformity with the settled procedure of law, and (g) whether action of the authorities below can be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief, relevant portion whereof, is extracted herein under:- "4. Summary of findings I have carefully perused the return of income of Sh. Virbhadra Singh (Assessment Year 2012-13) and information received from and copies of the statements recorded by the Investigation Wing and the following facts emerge:- 4.1 Sh. Virbhadra Singh is showing his return with gross total income of Rs. 18,66,089/- from salary and income from other sources. 4.2 Sh. Virbhadra Singh has received interest free unsecured loans of Rs. 2.4 Crores from Sh. Vakamulla Chandrashekhar in Financial Year 2011-12. 4.3 Sh. Vakamulla Chandrashekhar submitted that he advanced the above mentioned loans to Sh. Virbhadra Singh out of his agricultural income of Rs. 3.4 Crores in Financial Year 2011-12 and out of unsecured loans taken by him from Sh.Gurusharan Singh (Rs. 0.49 Crores), Jai Bharat Foods (Rs. 0.73 Crores) etc. 4.4 However, it was proved that Sh. Vakamulla Chandrashekhar was not having sufficient agricultural land to substantiate his claim. 4.5 Sh. Ram Parakash Bhatia, who was controlling various paper entities including Jai Bharat Foods, admitted on oath that he had provided accommodation entries to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at: (i) Parties contradicted with regard to the nature of loan; (ii) in the absence of any proof or evidence, justifying income from agricultural source or unsecured loans, creditworthiness of the creditor remained to be examined; (iii) Though in the hands of the loaner, a sum of Rs. 3,40,85,000/-, so claimed as income from agriculture was assessed as an income from undisclosed source, under Section 68 of the Act, yet genuineness of the transaction required examination. More so, when such assessment was subject matter of challenge in an appeal before the appropriate jurisdictional authority; (iv) Even though assessee was not maintaining books of accounts, but however, information to which only he had access, in the nature of bank accounts etc. required submission and examination, in deciding a jurisdictional issue of fact; (v) In the absence of any prior assessment, there is no jurisdictional error in the Assessing Officer, calling upon the assessee to place all material in its power and possession, enabling the officer to decide the fact in issue; (vi) There was proper application of mind by the sanctioning authority; and (vii) Assessee's participation in the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.347 of 2014, decided on 4.7.2014, titled as Joint Commissioner of Income Tax v. Kalanithi Maran; (ii) Commissioner of Income Tax, Gujarat v. Vijaybhai N. Chandrani, (2013) 14 SCC 661; (iii) Commissioner of Income Tax and others v. Chhabil Dass Agarwal, (2014) 1 SCC 603; (iv) Lalji Haridas v. Income-Tax Officer and another, (1961) 43 ITR 387; (v) Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers Private Limited, (2008) 14 SCC 208 = (2007) 291 ITR 500; (vi) Raymond Woolen Mills Ltd. vs. ITO (1999) 236 ITR 34 (SC) : 2008 (14) SCC 218; (vii) Phool Chand Bajrang Lal and another v. Income-Tax Officer and another, (1993) 203 ITR 456 : (1993) 4 SCC 77; (viii) Ess Ess Kay Engineering Co. P. Ltd. v. Commissioner of Income Tax, 247 ITR 818; (ix) Decision dated 04.03.2016, rendered by the Calcutta High Court in ITA No.297 of 2006, titled as Prem Chand Shaw (Jaiswal) V. Assistant Commissioner, Circle-38, Kolkata & Anr; (x) Sunil Kumar Jain v. CIT, 284 ITR 626 (Allahabad); (xi) Mangilal Jain V/S Income Tax Officer, (2009) 315 ITR 105 (Mad); (xii) Shankar Industries v. Commissioner of Income Tax, Central, 114 ITR 689 (Cal); (xiii) Civil Misc. Writ Petition No. 181 (Tax) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal return Rs. 17,60,090/- Rs. 12,97,055/- Rs. 1,97,150/- Date of filing Return 2.8.2012 (P-1) 28.7.2012 (P-1) 7.8.2013 (P-1) Date of Notice u/s 148 of the Act 29.3.2016 (P-2) 29.3.2016 (P-2) 29.3.2016 (P-2) E. Return refiled 20.4.2016 after receipt of notice u/s 148 of the Act. 28.3.2013 for amount of Rs. 14,33,200/- 28.4.2016 for amount of Rs. 1,97,150/- Date on which request for supply of reasons was made 27.4.2016 25.4.2016 28.4.2016 Reasons supplied on 9.5.2016 9.5.2016 9.5.2016 Objections filed on 29.6.2016 (P-4) 16.6.2016 (P-4) 29.6.2016 (P-5). Rejection of Objections is same in all petitions except CWP 3080, Page 70 24.11.2016 (P-5) 24.11.2016 (P-5) 24.11.2016 (P-6) Loan Advanced by Vakamulla Chandershekhar 2.4 crores 1.5 crore 2 crores 20. It is a common case of parties that original return dated 02.08.2012 filed by the petitioner, in compliance of Section 139 was not subjected to assessment under sub-section (3) of Section 143. Return dated 02.08.2012, came to be processed only under sub- section (1) of Section 143, in which there is no reference of these transactions. Thereafter, the first c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s A. Raman and Co., AIR 1968 SC 49, held that: "6. The High Court exercising jurisdiction under Article 226 of the Constitution has power to set aside a notice issued under Section 147 of the Income-tax Act, 1961, if the condition precedent to the exercise of the jurisdiction does not exist. The Court may, in exercise of its powers, ascertain whether the Income-tax Officer had in his possession any information: the Court may also determine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the Court extends no further. Whether on the information in his possession he should commence a proceeding for assessment or reassessment, must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act; if he has information from which it may be said prima facie, that he had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside or vacate the notice for reassessment on a re- appraisal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exclusion of all other modes and Forums. But it did recognize certain exceptions to this rule and that, inter alia being, where the action of the statutory authority is not in accordance with the statutory provisions; in defiance of fundamental principles of judicial procedure; and in total violation of principle of natural justice. 27. Justifying the action of the petitioner in bypassing the statutory remedy and directly assailing the notice for reassessment, Mr. Vishal Mohan, learned counsel, seeks reliance on the decision rendered by the Bombay High Court, in Ajanta Pharma Ltd. (supra). The decision came to be rendered in the given facts and circumstances, where reason for reassessment being non-discloser of invoice/details of the purchase of the trading goods exported and failure to co-relate the trading exports with the trading goods exported was found to have been non-existent, in fact contradicted from the record rendering the reasons of the Assessing Officer to be totally "flimsy" and not "sufficient to draw conclusion about the escapement of income" and there being "no material" before the Assessing Officer, entitling him to reopen the case of assessment, the Court foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years." 32. Since then, the practice has been in vogue. The mechanism evolved is only a safeguard, a protection from harassment of the assessee, for avoiding unwarranted harassment, from undesirable adjudicatory process, so initiated, perhaps on jurisdictional error or such material which ex-facie may be false or reason(s) which prima facie appears to be baseless or without any cause or justification. The object being, affording an opportunity to an assessee of putting across its case, by placing authentic and undisputed material, satisfying no escapement of income from assessment, enabling the authority to consider, and if so required, drop the proceedings. There can be a fact situation where out of malice or for extrane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, we are not inclined to dismiss the petition on such a ground. However, on this issue, we refrain from making any observation, save and except that petitioner is duty bound to fully cooperate in the expeditious adjudication of all proceedings. REASONS TO BELIEVE 36. The expression "reasons to believe" stands adequately elaborated by the Apex Court in its various pronouncements. The issue is no longer debatable. 37. By relying upon its earlier decision, rendered by a Constitution Bench (five-Judge) judgment, in Calcutta Discount Co. Ltd., v. Income-tax Officer, Companies District I, Calcutta and another, AIR 1961 SC 372, a Three-Judge Bench of the apex Court in S. Narayanappa and others v. Commissioner of Income-Tax, Bangalore, (1967) 63 ITR 219 : [AIR 1967 SC 523], held that: "if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of under-assessment that would be sufficient to give jurisdiction to the Income Tax Officer to issue the notice under S. 34. Whether these grounds are adequate or not is not a matter for the Court to inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the "true" and "full" facts in the case and the I.-T.O. would have the jurisdiction to reopen the concluded assessment in such a, case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under S. 147 of the Act, on receipt of the information subsequently. The subsequent information on the basis of which the I.-T.O. acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or non-specific." ... ... ... "26... ...One of the purposes of S. 147, appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer is within the realm of subjective satisfaction." (Emphasis supplied) 41. It is also the law that the Assessing Officer is not precluded to reopen assessment of an earlier year on the basis of his finding of fact, so made on the basis of fresh material, so discovered, in the course of assessment of next assessment year [Ess Ess Kay Engineering Co. (supra)]. 42. In Calcutta Discount Co. Ltd., v. Income-tax Officer, Companies District I, Calutta and another, AIR 1961 SC 372, the apex Court held that: "9. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example - "I have produced the account books and the documents : You, the assessing officer examine them, and find out the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the notice issued by him would be liable to be struck down as invalid." (Emphasis supplied) 44. The Apex Court in Income Tax Officer, Cuttack and others v. Biju Patnaik, 1991 Supp. (1) SCC 161, observed that while examining the existence of reasons, record can be looked into. 45. In M/s Niranjan & Co. Pvt. Ltd. v. Commissioner of Income Tax, West Bengal-I and others, 1986 (Supp) SCC 272, the apex Court held that: "21. It was contended on behalf of the assessee/appellant relying on the observations of this Court in Commr. of Income-tax, Gujarat v. A. Raman and Co., (AIR 1968 SC 49) (supra), that the Income-tax Officer must have had reason to believe and in consequence of information he must have that reason to believe and it was submitted that the information was already there and there was no new information from which the Income-tax Officer could have formed the belief. Having regard to the facts of this case as discussed above and the nature of the information indicated before, we are of the opinion that there was information in the form of a revised return and since the information mentioned before came to the knowledge of the Income-tax Officer subsequent to the mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from his friends, loaner had advanced payments as interest free unsecured loan to the petitioner and his family members. 49. The factum of advancement of such money came to be admitted only in response to the notice. Prior thereto, both the petitioner and his family members maintained stoic silence. 50. Also, the source from which the loaner itself received such income, prima facie, was found to be false, which fact surfaced only during the course of investigation conducted under Section 131-133A of the Act. There were only paper transactions. Neither did the loaner receive any unsecured advance from anyone, much less the three entities, particulars whereof were disclosed by him, nor did he have sufficient income from agricultural source. Such fact also stood substantially corroborated with the disclosure of his income in the previous years. Further Smt. Tripurana Ahalya Devi, whom loaner claimed to be his Aunt, on oath, denied having know him at all, much less entered into any transaction with him, monetary or otherwise. Even transactions of unsecured loans were discovered to be bogus, for being mere paper entries taken from Ram Prakash Bhatia, who allegedly owned 17 concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional fact requires adjudication by the Assessing Officer. The petitioner may also have justifiable explanation of repayment, but from the material placed before us, it cannot be said that either the initiation of process of assessment or rejection of objections is on flimsy grounds or in an arbitrary manner. 54. The burden to prove the income which stands accounted for, is on the assessee. In Sreelekha Banerjee V. Commissioner of Income Tax, (1963) 49 ITR (SC) 112, the Court held that: "It seems to us that the correct approach to questions of this kind is this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked; what the source of that money is and to prove that it does not bear the nature of income. The department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e last six preceding years, he disclosed income from agricultural source to be less than Rs. 3,00,000/- and its unusual increase to Rs. 85,00,000/- only in the year in question, is again a matter to be considered by the Jurisdictional Officer. Prima facie it stands noticed by the officer that income of the loaner, cumulative from all sources, for the last five preceding years, is far less than Rs. 5.9 Crores, the amount lent to the petitioner and his family member. 57. Also, according to the loaner, in the recent years by understating its value, a company closely held by the petitioner's children, had purchased a Farm House at New Delhi, for a sum of Rs. 6.61 crores. 58. When an assessee claims to have borrowed money, onus to establish such fact lies upon him. But discharge of such onus, would still not preclude the Assessing Officer in otherwise examining the genuineness of the transaction, as an independent and unbiased fact finding authority. 59. We find existence of reasonable ground, enabling the Assessing Officer to form a belief, with regard to the non-disclosure/escapement of income. The belief cannot be said to be arbitrary, capricious or without any basis. It is neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a case fit for issuance of notice, did the authority accord its sanction. It is brought to our notice that offices of the Assessing Officer and the Sanctioning Authority are in the very same building and petitioner is also a local resident. It was convenient for the authority to have dealt with the matter the very same day. It is not a herculean, much less an impossible task to accomplish. 66. Significantly, no malafides stand alleged, much less against any one the concerned officers. 67. Hence, in the given facts and circumstances, we do not find such action to be illegal, raising suspicion or doubt, with regard to proper application of mind by the authority concerned. 68. We further find the order rejecting the objections to be a reasoned one. It is certainly not cryptic. Every issue raised by the assessee stands considered and dealt with, with a rider that it is open for the assessee to appear before the Jurisdictional Officer and place all material for just determination and conclusion of the proceedings. The view expressed by the Assessing Officer has been held to be a prima facie one. It is not a case of change of opinion. 69. While contending that the sanctioning autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer not possessing any material, enabling him to record reasons of belief. Also simultaneous issuance of notices of inquiry and reassessment came to be initiated against the assessee who was called upon to furnish information of money spent on the construction of a house and much prior to conclusion of such inquiry, the Assessing Officer, by pre-judging the issue, without any basis or material, proceeded to reassess the income declared by the assessee. It is in this backdrop, the Court found the revenue to have acted with undue haste. 72. On this count, our attention is also invited to the decision rendered by the Delhi High Court in Central India Electric Supply (supra), where the sanctioning authority had simply appended its signature below the word "Yes" so affixed by a rubber stamp. In the given facts, the Court found the decision taken to be purely mechanical in manner. 73. However, the instant case is not that of mere rubber stamping, for the competent authority, in principle, was in agreement with the reasons assigned by the Assessing Officer, so placed before him, which came to be considered and sanction accorded, with proper application of mind. He himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said question by taking appropriate proceedings both against A and B. That being so, we do not think that Mr. Nambiar would be justified in resisting the enquiry which is proposed to be held by respondent No.1 in pursuance of the impugned notice issued by him against the appellant. Under these circumstances we do not propose to deal with the point of law sought to be raised by Mr. Nambiar". 77. In Income Tax Officer, A-Ward, Lucknow v. Bachu Lal Kapoor, AIR 1966 SC 1148, the apex Court reiterated the aforesaid principle. 78. In Sunil Kumar Jain (supra), the Court affirmed the action of the Jurisdictional Officer in reopening assessments even in case where such income came to be assessed in the hands of another. In this backdrop, it was observed that:- "Going to the merits of the case, we find that it is not in dispute that the cash amount of Rs. 2,19,000 and the pawned articles valued at Rs. 10,506 have been claimed by the petitioners as belonging to them. Merely because it has been taxed at the hands of Sri Prem Chandra Jain will not preclude the Income-tax Officer from assessing the same at the hands of the right person. From the reason recorded for reopening of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where it appears to the Income-tax Officer, that certain income had been received during a particular year but it is not clear who has received that income it is open to the Income-tax Officer to start proceedings against all the persons individually or collectively to ascertain the correct position. In the case of Sohan Singh [1986] 158 ITR 174 the Delhi High Court has taken a similar view. In the case of Smt. Durgawati Singh [1998] 234 ITR 249 this court has held that it is settled that when there is a doubt as to which person amongst two was liable to be assessed, parallel proceedings may be taken against both and alternative assessments may also be framed. It is also equally true that while a protective assessment is permissible, it is not open to the income-tax appellate authorities constituted under the Act to make a protective order. The law does not permit assessment of the same income successively in different hands. The tax can only be levied and collected in the hands of the person who has really earned the income and is liable to pay tax thereon. In the case of Banyan and Berry [1996] 222 ITR 831 the Gujarat High Court has held that where there is doubt or amb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Also no malafides stand alleged. 83. It cannot be said that rejection of the objections are based on frivolous or extraneous factors and circumstances. There is complete and proper application of mind to the attending facts and circumstances. The objections rejected, by a speaking order, also stands duly communicated to the petitioner. Mere rejection of objections cannot lead to formation of an opinion about the Assessing Authority, under all circumstances, deciding the matter in favour of the revenue. 84. In the instant case, we find that the petitioner seeks adjudication, on merits, of the fact in issue, which is impermissible in law. In the absence of definite and authentic information, this Court cannot as a fact finding authority, by way of a roving inquiry examine the matter, holding the proceedings initiated under Section 148 of the Act to be untenable on merits. Assessee is always open to make all such submissions before the appropriate authority. 85. Reliance on a decision dated 04.03.2016, rendered by the Calcutta High Court in Prem Chand Shaw (supra), is only for the purpose of pressing the provisions of Section 292-B of the Act, which, in the instant case, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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