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TMI Blog1972 (7) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Rs. 50,000 had escaped assessment or was likely to have escaped assessment for any of the years mentioned above and had, therefore, no jurisdiction to reopen the assessments that had been completed long years ago. This has come up before us on an order of reference by Mathew J., in view of the question whether a remedy by an application under article 226 of the Constitution would be available to an assessee in regard to notices issued under section 148 of the Act for reassessment as envisaged by section 147 of the Act. At the time the learned judge heard the case, assessment orders had been passed and appeals had been filed by the assessee and those appeals were pending. It was, therefore, urged on behalf of the revenue that the petition should be dismissed as the assessee had right to have the matter decided by the Appellate Assistant Commissioner and had a further right in second appeal and even on a reference to this court. Counsel for the assessee relied on the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District, Calcutta and contended that this court has not only jurisdiction but that this is a fit case where this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act but quashed the assessment which had taken place pursuant to that notice after the institution of the proceedings under article 226 of the Constitution. We may also extract a passage from another decision of the Supreme Court in Madhya Pradesh Industries Ltd. v. Income-tax Officer, Nagpur : " It is of course open for the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. Therein, it was observed that the expression 'reason to believe ' in section 34 does not mean purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith : it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that 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 income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1. -For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: -- (a) where income chargeable to tax has been under-assessed ; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax, Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. " The notices, exhibit P-3 series, were issued on October 12, 1965. These notices were clearly after eight years after the close of the latest of the assessment years with which we are concerned in this case, namely, 1954-55. In such cases, section 149 of the Act is attracted and reassessment proceedings can be commenced only if the Income-tax Officer had reason to believe that the income chargeable to tax which had escaped assessment amounted or was likely to amount to rupees fifty thousand or more for that year. Under section 142, the Income-tax Officer is obliged to record his reasons before issuing the notice under section 148(1) of the Act and from section 15(1) it is clear that the Board has to be satisfied on the reasons recorded by the Income-tax Officer that the case is a fit one for issue of notice under section 148. The assessee, the petitioner before us, had filed returns for the year in question and had also furnished material before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income the 1st respondent has taken into account the income which arose before the year 1949. This in any view of the matter cannot be taken into account for assessing the income of the petitioner for the year 1950-51 onwards. So also the fact that the petitioner had received a capital gain of Rs. 51,500 on the sale of a house property for the assessment year 1948-49 is clearly established on facts. No fact in respect of this transaction was suppressed by the assessee. The 1st respondent is now coming to a different conclusion on the same materials placed before the assessing authority at the time of the original assessment. This is not to be treated as a ground for reopening the assessment. Another ground which weighed with the 1st respondent for reopening the assessment is that the petitioner did not disclose in his wealth statement as on December 31, 1953, an amount in fixed deposit in Indian Bank, Matunga, Bombay. The deposit matured in the year 1953 and was received back by the petitioner in, October, 1953, itself, and so this was not stated in the wealth statement as on December 31, 1953, as an item of wealth of the petitioner. There are no materials available before the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his state of the pleadings we suggested to counsel for the revenue that perhaps it would be justifiable on the basis of the decision of the Supreme Court in Madhya Pradesh Industries Ltd. v. Income-tax 0fficer, Nagpur, to quash the notices, exhibit P-3 series, on the ground that no materials had been placed before us from which an inference was possible that income amounting to Rs. 50,000 or more was likely to have escaped assessment in each of the years. Reasons were recorded by the Income-tax Officer before the decision to issue notice under section 148. These reasons had not been produced. Counsel for the revenue later produced the reasons. A glance at those reasons would show that money expended for the purchase of lands and other property from the year 1946 to 1948, both inclusive, had been taken into account in reaching the figure of Rs. 2,54,740. Items 1 to 7 at pages 4 and 5 of the document containing the reasons recorded by the Income-tax Officer which was produced before us amount to Rs. 30,578, all pertaining to purchase or acquisition of other property before the earliest of the accounting years, namely, 1949, relating to the corresponding assessment year 1950-51. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 148 for the assessment year 1954-55." In the light of what we have stated above, for the figure of Rs. 2,54,740 we have to substitute Rs. 1,55,740. It would then be clear that for each of the years the income that had escaped assessment would be much less than Rs. 50,000, if the method adopted by the Income-tax Officer of dividing the total income by five is adopted. There is nothing to indicate that in any particular year, out of the years 1950-51 to 1954-55, income in excess of Rs. 50,000 had escaped assessment. This is also not seen from the records that were made available. There was no material it appears before the Income-tax Officer which would enable him to say that in any of the five years 1950-51 to 1954-55 income to the extent of Rs. 50,000 or more had escaped assessment or was likely to have escaped assessment. In these circumstances we have to come to the conclusion that the require ments of section 147(a) read with section 149 had not been satisfied and the Income-tax Officer had no jurisdiction whatever to initiate proceedings for reassessment of the petitioner for the five years 1950-51 to 1954-55. We have already referred to the question whether we will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... series under section 143(2) by the petitioner has been detailed in paragraphs 8 to 17 of the petition and references have also been made to exhibits P-5, P-6, P-7 and P-8. The averments in these paragraphs have not been denied in the counter-affidavit that has been filed in the case excepting to state that the Income-tax Officer was not directed by any superior officer to revive proceedings under section 147. This really does not touch the question. The fact that no final decision had been taken to proceed with the notices, exhibit P-3 series, till the notice, exhibit P-9 series, under section 143(2) were issued to the petitioner is clear from the averments in paragraphs 8 to 17 which stand unchallenged. We do not think that an assessee who had reasonable grounds to believe that the proceedings which were initiated by notice under section 148 by the Income-tax Officer should rush to this court before his reason for such belief is shattered. He has come very promptly before this court within a short time after the receipt of the notices under section 143(2). We are unable to accept the suggestion made on behalf of the revenue that this petition is belated. We, accordingly, quash e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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