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TMI Blog2002 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2002, issued under section 148 of the Income-tax Act, 1961 (the "I.T. Act"), being annexure P2 to this petition, seeking to reopen the assessment in respect of the assessment year 1995-96 is the subject-matter of challenge in this writ petition. Learned counsel for the petitioner challenges the said notice on various grounds. The notice that has been issued is subject to a proviso to section 147 since issued four years after the end of the relevant assessment year and as such is incompetent and without jurisdiction. Until it is shown that the income sought to be assessed had escaped assessment by reason of failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for assessment, it cannot be reopened. The reopening could be made only if the authority is satisfied that there are reasons to believe that the income has escaped assessment. Though, the reason cannot be judged as to its sufficiency, yet the court can examine as to whether there are any reasons disclosed in the order of reopening. The notice was issued without the sanction of the Deputy Commissioner as was required under section 151. On the merits, it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer or the Commissioner. Since such protection is mandatory, it cannot be waived or acquiesced neither it is subjected to estoppel. He relied on P.V. Doshi v. CIT [1978] 113 ITR 22 (Guj). Submission on behalf of the respondents: Mr. Rupen Mitra, learned counsel for the respondents, on the other hand, points out that the sanction as required under section 151 of the Deputy Commissioner has since been obtained. He then contends that in this case there was failure to disclose fully and truly the materials relevant for assessment, which has since escaped notice. The reasons were sufficient. In any event, those reasons are not justiciable, as to their sufficiency, by the court. Relying on section 147, Explanations 1 and 2, particularly, clause (c)(i) of Explanation 2, he points out that this is a case of underassessment and as such it is a case of escapement of assessment within the meaning of the proviso. That the materials produced before the Assessing Officer cannot be a ground to contend that the materials were disclosed truly and fully, in view of Explanation 1, which stands in the way of the petitioner's contention. According to him, if there is a mista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfaction noted in the record, I do not find any substance in the submission of Mr. Dutta with regard to this point. Escaping of assessment: In order to appreciate the other points raised by Mr. Dutta, we may examine the provisions contained in section 147. Section 147 empowers the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment, to assess or reassess such income. In the present case, it is alleged that the income had escaped assessment when assessment was made under section 143(3) of the Income-tax Act. Therefore, this condition appears to be fulfilled. Can assessment be reopened after four years? But the fact remains that the assessment relates to 1995-96 assessment year. But the assessment was sought to be reopened by a notice issued on March 27, 2002. The proviso to section 147 provides that no assessment can be reopened under section 147, if the earlier assessment was made under section 143(3), after the expiry of four years from the end of the relevant assessment year. In the present case, the earlier assessment, admittedly, being one under section 143(3), the proviso debars reopening of the assessment in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. If there is understatement of income or excessive loss, deduction, allowance or relief, it can be reopened. If the tax is underassessed, then also it can be reopened. There is no difficulty with regard to the contention of Mr. Mitra, if such reopening is made within the four years from the end of the relevant assessment year. But the question assumes a different dimension after the expiry of these four years from the end of the relevant assessment year, in view of the proviso provided to section 147, in respect of reopening and assessment made under section 143(3). In the present case, admittedly, the earlier assessment was completed under section 143(3), therefore, the proviso is attracted and in such a case the four year limitation is a bar. It would not be a bar if the earlier assessment is made under any provision other than section 143(3). In such a case it can be re-opened even beyond four years provided any of the two conditions are satisfied. The present case does not fall within the first condition of non-submission of return or non-response to notice. It can be reopened if the assessee had failed to fully and truly disclose all material facts necessary for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out that 90 per cent. of such payment was made to a single party, D.P. Shaw and Co. (Wine) Pvt. Ltd., aggregating to Rs. 1,78,15,909 in cash in violation of section 40A(3). From the order dated March 30, 1998, it appears that the books of account were examined and it was found that the payments so made were genuine. The managing director of D.P. Shaw and Co. (Wine) Pvt. Ltd. was produced as a wit ness. This witness had confirmed that they had insisted upon cash payment, since they were required to make cash payment towards excise duty, before lifting the stock from the ware house. He also stated that he is also assessed to income-tax in Company Circle 2(1), Kolkata, and had shown those receipts in the accounts filed with the income-tax return of his company. The case was, however, adjourned for filing explanation regarding cash payments to the other two parties. Thereafter, the assessment was made under section 143(3) on March 31, 1998. Section 40A(3) has two provisos. The second proviso provides that no disallowance under the said sub-section shall be made, if any payment is made beyond the prescribed amount otherwise than by a crossed cheque drawn on a bank or a crossed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer to fall within the scope and ambit of clause (j) of rule 6DD so far as the petitioner is concerned and the said D.P. Shaw and Co. (Wine) Pvt. Ltd., which might be required to pay the amount in terms of clause (b) of rule 6DD. But, this is a question of inference by the Assessing Officer. If at a later point of time, some other officer may not agree with the inference drawn by the predecessor, the same would not be a ground for reopening, after the expiry of four years from the end of the assessment year, in view of the proviso to section 147. In the present case, there are some materials to show that this question was gone into and some explanations were on record. However, those were not specifically dealt with in the assessment order. Omission to deal with the question in the assessment order cannot be construed to bring it within the exception provided in the proviso to section 147 for reopening the assessment. If there are sufficient materials to draw a particular inference, omission to deal with the same cannot be constituted to draw an inference adverse to the assessee, at a subsequent stage hit by the proviso to section 147. Since such benefit are to be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreted strictly. When a particular action has to be taken in a particular manner, the same has to be taken in that manner and not otherwise. When the proviso provides that it can be reopened only if there is a failure to disclose truly and fully all materials, then it is only on such failure, it can be reopened. But, there is nothing recorded in the order showing the satisfaction of the Joint Commissioner or the Assessing Officer that there was a failure on the part of the assessee as above. Simple escapement of notice will not confer jurisdiction to reopen the assessment, four years after the end of the assessment year. This is a question of jurisdiction to be assumed by the concerned officer. These are jurisdictional facts, which this court can go into, even for the purpose of finding out as to whether such reason is present or not. The court could not have judged the sufficiency of the reason, but it can see whether such reason is present. Here no such reason has been disclosed that there was a failure on the part of the assessee. On the other hand, from the tenor of the order, it appears that the payment was made in contravention of the provision of section 40A(3), but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ganga Saran and Sons P. Ltd. [1981] 130 ITR 1 (SC). It was also the view taken by the Supreme Court in Modi Spinning and Weaving Mills Co. Ltd.'s case [1970] 75 ITR 367. In the said decision, it was held that these conditions are cumulative and precedent to the exercise of jurisdiction to issue a notice of reassessment. It had followed the decision in Calcutta Discount Co. Ltd.'s case [1961] 41 ITR 191 (SC). In Chhugamal Rajpal's case [1971] 79 ITR 603, the apex court had held that the important safeguards provided in sections 147 and 151 cannot be lightly treated by the Income-tax Officer, as well as by the Commissioner. The other decisions cited by Mr. Dutta are repetition of the same proposition. The view I have taken is also supported by the decision in Orient Beverages Ltd. [1994] 208 ITR 509 (Cal). In ITO v. Kamal Singh Rampuria [1997] 11 SCC 285, it was held that the assessee during the original assessment having produced relevant materials, it cannot be said that there was a failure on the part of the assessee to disclose primary materials. In Calcutta Discount Co. Ltd.'s case [1961] 41 ITR 191, the Supreme Court had held that underassessment must occur by reason of failu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (SC) are concerned, there is no dispute about the proposition laid down therein. The sufficiency or correctness of the reasons cannot be judged by the court. But there must be some reasons. In the present case, no such reason has been mentioned about the non-disclosure. Therefore this is a case of complete absence of the reason on the basis of which the assessment can be reopened; therefore, the principle laid down in the said decision cannot be attracted. It is an examination of jurisdictional facts nonexistence whereof renders the exercise without jurisdiction. The decision in Sardar Harvinder Singh Sehgal v. Asst. CIT [1997] 227 ITR 512 (Gauhati), it appears to be misplaced in view of the fact that we are not going by any mistake appearing in the notice. It is not a case of mistake. It is a case of non-existence of the jurisdictional fact in order to enable the authority to assume jurisdiction. Can section 292B be attracted: The reference to section 292B of the Income-tax Act by Mr. Mitra is out of place inasmuch as, section 292B deals with invalidation of return of income, assessment, notice, summons or other proceedings furnished or made or issued or taken or purported t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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