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TMI Blog2005 (8) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... NT The judgment of the court was delivered by R.K. Agrawal J.-By means of four separate writ petitions filed under article 226 of the Constitution of India, the petitioner, Dr. Shashi Kant Garg, has challenged the validity of the notices dated September 12, 2000, issued under section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), relating to the assessment years 1991-92 to 1994-95 where Civil Miscellaneous Writ Petition No. 533 of 2002 relates to the assessment year 1993-94; Civil Miscellaneous Writ Petition No. 534 of 2002 relates to the assessment year 1994-95; Civil Miscellaneous Writ Petition No. 539 of 2002 relates to the assessment year 1991-92, the Civil Miscellaneous Writ Petition No. 540 of 2002 relates to the assessment year 1992-93. As all the four writ petitions relate to the same petitioner and raise common questions of law and also as the counter-affidavits and rejoinder affidavits have been exchanged between the parties, with the consent of learned counsel, they have been heard together and are being disposed of finally by a common order in accordance with the rules of the court. The facts giving rise to the aforesaid writ petitions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by way of commission was not genuine and it was only by way of accommodating nature to reduce the profit of AP. Consequently, the income in question was assessed in the hands of RPPL on protective basis. The proceeding under section 148 of the Act was also taken in the case of AP which is a proprietary concern of one Dr. Amar Kant Gupta, with a view to make corresponding disallowance in the assessment and also similar other payments made to other parties by AP. According to the petitioner, in the assessment orders passed against AP, no disallowance was made as the payment was found to be verifiable. Subsequently, the petitioner was issued notices dated March 20, 1997, under section 148 of the Act in respect of all the assessment years in question by the Income-tax Officer, Ward II (2), Muzaffarnagar, respondent No. 3, on the ground that the commission was paid to the petitioner and, therefore, the income to the extent of commission paid by AP has escaped assessment. In the reassessment proceeding, the petitioner submitted his explanation which was accepted by respondent No. 3 and in the consolidated order passed on December 31, 1998, for all the assessment years in question, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d there was no apparent reason to add such commission income in the hands of the petitioner. Thus, there was no valid basis or material on the basis of which respondent No. 3 could form a reasonable belief that any income had escaped assessment to tax. On the other hand, it is only a case of change of opinion for which proceedings under section 147 of the Act cannot be initiated. He further submitted that from a perusal of the reason supplied by respondent No. 3 which has been filed as annexure 10 to the writ petition and is not in dispute, it will be seen that the assessing authority is having second thoughts over the matter which he had already dealt with in the order dated December 31, 1998, and, therefore, the entire proceedings are wholly illegal and without jurisdiction. According to the petitioner, the reasons recorded by respondent No. 3 while issuing the notice dated September 12, 2000, and the earlier notice dated December 17, 1997, in sum and substance, are the same and, therefore, the proceedings initiated by issuance of notice dated September 12, 2000, are wholly illegal and without jurisdiction and amount to harassment, which is not permissible under law. Sri Garg, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember 31, 1998. The notice under section 148 of the Act has been issued on September 12, 2000, for each of the assessment years in question. The period of four years had expired on March 31, 1996, for the assessment year 1991-92; on March 31, 1997, for the assessment year 1992-93; on March 31, 1998, for the assessment year 1993-94 and on March 31, 1999, for the assessment year 1994-95. The question is whether in a case where the assessment has been made under section 143(3) and/or section 147 of the Act and four years from the end of the assessment year had expired, a notice for reassessment under section 148 of the Act can be issued only with the prior approval/ recording of necessary satisfaction by the Chief Commissioner or the Commissioner of Income-tax, as required under the proviso to sub-section (1) of section 151 of the Act or not or by the Additional Commissioner. In order to appreciate the issue, it is relevant to reproduce the various provisions of the Act which may throw some light on the matter. Section 2(7A) of the Act defines "Assessing Officer" as follows: "(7A) 'Assessing Officer' means the Assistant Commissioner or Deputy Commissioner or Assistant Director or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, by general or special order, and subject to such conditions, restrictions or limitations, as may be specified therein, the powers of the Director General or Director or the Chief Commissioner or the Commissioner. Sub-sections (4) and (5) of section 120 of the Act are reproduced below: "(4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,- (a) authorise any Director-General or Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the Director-General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Explanation 1.- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.- 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 no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year." Section 150 of the Act makes provision for cases where assessment is to be made in pursuance of an order on appeal etc. It reads as follows: "150. Provision for cases where assessment is in pursuance of an order on appeal, etc.-(1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a court in any proceeding under any other law. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of section 117 of the Act, as per the definition given in sections 2(15A) and 2(16) of the Act. However, prior to April 1, 1988, an Additional Commissioner of Income-tax was also included within the meaning of the word "Commissioner" but after its omission by the Direct Tax Laws (Amendment) Act, 1987 with effect from April 1, 1988. The Additional Commissioner cannot be included in the term "Commissioner". Further from a reading of the definition of the term "Joint Commissioner", as given in section 2(28C) of the Act, it is seen that an Additional Commissioner of Income-tax is included in the term "Joint Commissioner". This court in Civil Miscellaneous Writ Petition No. 1646 of 2002, Dharam Pal Singh Rao v. ITO [2004] 271 ITR 223 (All) decided on August 5, 2004, and Civil Miscellaneous Writ Petition No. 687 of 2005, Farrukhabad Gramin Bank v. Addl. CIT [2005] 277 ITR 320 (All), decided on July 26, 2005, has held that in view of the definition of the words "Joint Commissioner" in section 2(28C) of the Act, an Additional Commissioner is to be treated as a Joint Commissioner for all purposes. Under section 120 of the Act which deals with the jurisdiction of the income-tax authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment or reassessment or recomputation is to be made in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a court in any proceeding under any other law. Sub-section (2) excludes the applicability of sub-section (1) in certain circumstances enumerated therein. Section 151 of the Act deals with the sanction for issue of notice. Under sub-section (1), where an assessment has been made under sub-section (3) of section 143 or section 147, no notice can be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice. However, under the proviso to sub-section (1), it has been provided that if the period of four years from the end of the relevant assessment year has expired, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the rank of the Assistant Commissioner can issue a notice but before issuing the notice, the satisfaction of the Commissioner or the Chief Commissioner of the Income-tax is necessarily to be obtained. This would be the position after April 1, 1988, in view of the omission of the words "Additional Commissioner" in section 2(16) of the Act by the Direct Tax Laws (Amendment) Act, 1987; and (iii) where an assessment has not been made under sub-section (3) of section 143 or section 147 of the Act and the period of four years from the end of the relevant assessment year had expired, notice under section 148 of the Act can be issued only by an officer of the rank of Joint Commissioner after being satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. Here, the term "Joint Commissioner" is interchangeable with the words "Additional Commissioner" in view of the definition of the term "Joint Commissioner", as given in section 2(28C) of the Act. Having analysed the various provisions of the Act defining jurisdiction of the various authorities and the powers, the procedure to be adopted and the limitations imposed upon such authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement given by the accused. Relying upon the rule laid down in Taylor v. Taylor [1876] 1 Ch 426 and Nazir Ahmad v. King-Emperor, AIR 1936 PC 253(2), it was held that section 164 Cr. P.C. which conferred on a magistrate the power to record statements or confessions, by necessary implication, prohibited a magistrate from giving oral evidence of the statements or confessions made to him. This principle has been approved by this court in a series of decisions and the latest being by a Constitution Bench in CIT v. Anjum M.H. Ghaswala [2002] 1 SCC 633." Thus, if the assessment has been made under sub-section (3) of section 143 or section 147 of the Act and the proceedings for reassessment are to be initiated after the period of four years, then the notice can be issued only after the Chief Commissioner or Commissioner of Income-tax, as the case may be, has recorded his satisfaction, for issuance of notice as provided under the proviso to sub-section (1) of section 151 of the Act. It may be mentioned here that in all the writ petitions a specific averment and a ground have been taken regarding the notice having been issued without the satisfaction of the Chief Commissioner or Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax, Muzaffar Nagar. In the case of CIT v. Maharaja Pratapsingh Bahadur of Gidhaur [1961] 45 41 ITR 421, the apex court while considering the provision of section 34 of the Indian Income-tax Act, 1922, which contained a similar proviso to the following effect: "Provided that- (1) the Income-tax Officer shall not issue a notice under this subsection unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice." has held that the notices issued under section 34, without obtaining prior approval of the Commissioner, were invalid. The apex court has held as follows: "It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income-tax Officer to obtain prior approval of the Commissioner, and unless that approval was obtained, the notices could not be issued. The notices were thus invalid." In the case of Union of India v. Rai Singh Deb Singh Bist [1973] 88 ITR 200 the apex court has held as follows: "Before an Income-tax Officer can issue a statutory notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax must be satisfied with the reasons recorded by the Assessing Officer that it is a fit case for reopening. Therefore, the satisfaction of the Chief Commissioner or the Commissioner is a sine qua non before issuance of a notice under section 148 by the Assessing Officer. The Assessing Officer may be of the rank of an Income-tax Officer or the Assistant Commissioner or the Deputy Commissioner, but when such notice is to be issued after the expiry of four years after the end of the relevant assessment year, the sanction of the Chief Commissioner or the Commissioner is a pre-condition. In that view of the matter, I am of the view that the notice issued under section 148 of the Income-tax Act beyond four years after the end of the relevant assessment year is bad in law inasmuch as the sanction of the Chief Commissioner or the Commissioner was not obtained before issuance of the notice." In the case of Simplex Concrete Piles (India) Ltd. v. Deputy CIT [2003] 50 262 ITR 605, the Calcutta High Court has held that section 151 is not a provision which enables the Revenue to do something. It is a restriction on the Revenue prohibiting it from doing something. It was a guid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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