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TMI Blog1998 (2) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitions. The facts of Special Civil Application No. 4201 of 1996 are being set out and the facts of the other petition admittedly being almost identical are not repeated. The petitioner had filed his return of income for the assessment year 1991-92 on October 21, 1992, declaring his total income at Rs. 27,118 along with the statement of income, notes appended thereto and other enclosures which are at annexure "C" to the petition. The case of the petitioner is that his return of income was daily scrutinised during the course of a regular assessment and the assessment order was made under section 143(3) of the Income-tax Act, 1961, on January 31, 1994, determining his total income at Rs. 27,120. According-to the petitioner, he had submitted a written explanation in his letter dated December 29, 1993, which was handed over to the Assessing Officer on January 5, 1994, in connection with the conversion of capital asset being his share in immovable property on August 15, 1990, into stock-in-trade and its consequential effect, in view of the query raised by the Assessing Officer. The Income-tax Officer passed the assessment order for the said assessment year 1991-92 on January 31, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he was assessable for the said assessment year. The case of the respondent as reflected in the affidavit-in-reply filed in this petition is that the petitioner has approached this court at a premature stage when only a notice under section 148 of the Act has been issued. It is stated that the notice has been issued after recording reasons which are in the order sheet at annexure-"A" to the affidavit-in-reply. It is stated that the computation of capital gains was shown by the assessee in respect of the said transfer in the return for the assessment year 1993-94. The assessee and his three brothers had adopted a weightage method by which sale consideration for the land was computed at Rs. 34,44.679 on the basis of the amount realised till that time from the shops sold, instead of straightaway showing the amount of Rs. 56,00,000 as sale consideration. It is stated that the stock-in-trade which came into existence by conversion of the capital asset on August 15, 1990, was transferred to the firm on September 19, 1990, by the assessee. However, the assessee did not include the capital gains arising out of such transfer, in the computation of the total income for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any capital gains in respect of the transfer made by the petitioner assessee of his share in favour of the said partnership firm. Reliance was placed in support of these submissions on the decisions of this court in VXL India Ltd. v. Asst. CIT [1995] 215 ITR 295; Birla VXL Ltd. v. Asst. CIT [1996] 217 ITR 1 ; Garden Silk Mills Ltd. v. CIT (Deputy) (No. 2) [1996] 222 ITR 68 (Guj) and Kaira District Co-operative Milk Producers Union Ltd. v. CIT (Asst.) [1996] 220 ITR 194 (Guj). It was further contended that the term "escaped assessment" should be given a restricted meaning and that it would not cover a mere change of opinion without there being any fresh material. It was submitted that "assessment" was a whole process of ascertaining income which was subjected to tax and an income which was not subjected to tax and once the material is placed on record and thereafter the assessment order is made, it should be assumed that the relevant taxable income had undergone the whole process of assessment and, therefore, there can arise no question of any escapement of the assessment of such income. Reliance was placed by learned counsel in support of this submission on a decision of the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 999] 236 ITR 845 (Appex.), by their learned counsel. It was contended that the Assessing Officer was proceeding with the matter in lawful exercise of his jurisdiction under section 147 of the Act and, therefore, a writ of prohibition or, my other writ or orders in the nature of writ of prohibition, cannot lie in such cases. It was submitted that if ultimately any adverse order is passed, that can be challenged by the assessee under the provisions of the Act and the assessee had therefore, alternative and efficacious remedies available in the special machinery set up for the purpose under the Act. There is no dispute about the fact that the impugned notice under section 148 of the Act, has been issued within four years from the end of the relevant assessment years 1991-92. Under section 147 of the said Act, within four years from the end of the relevant assessment year, the Assessing Officer, where lie had reason to believe that any income chargeable to tax has escaped assessment for any assessment year, may assess or reassess such income. However, after four years, the proviso would be attracted and no action can be taken under this section unless such income has escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssive relief is given or excessive loss or depreciation allowance or other allowance under the Act has been computed. In the aforesaid deemed cases of escapement of income, the Assessing Officer can initiate the proceedings on finding or discovering such cases and no debate whether they constitute cases of escapement of income, would be permissible. It will thus be seen that in the proceedings taken under section 147, the Assessing Officer may make an assessment or reassessment, or recomputation, as the case may be. The word "assess" refers to a situation where the assessment was not made in the normal manner while the word "reassess" refers to a situation where an assessment is already made, but it is sought to be reassessed on the basis of this provision. In cases where the Assessing Officer has not made an assessment of any item of income chargeable to tax while passing the assessment order in the relevant assessment year, it cannot be said that such income was subjected to an assessment. In the assessment proceedings, the Assessing Officer would ascertain on consideration of all relevant circumstances the amount of tax chargeable to a given taxpayer. The word "assessment" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The cases of underassessment or excessive relief which are deemed cases of escapement of income leave no scope for an argument that they are not cases of income having escaped assessment. If the Assessing Officer prima facie finds or discovers that the case falls in any of the clauses of Explanation 2, then those cases will be deemed cases of income that has escaped assessment and without anything more beyond such finding or discovery, he can initiate the proceedings under section 147 of the Act. On a proper interpretation of section 147 of the Act, it would appear that the power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings. In our view, the words "escaped assessment" where the return is filed, are apt to cover the case of discovery of a mistake in the assessment caused by either an erroneous construction of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the firm, were meant to be the price of the land which was to be actually paid from the collections received by the firm from membership fees as soon as received, as was envisaged admittedly in paragraph 11 of the partnership deed, there was no question of any change of opinion when on the relevant facts being found the Assessing Officer while protectively assessing the petitioner-assessee for the year 1993-94, noted that this was a case for issuance of a notice under section 148, which came to be issued thereafter. When the amount of taxable income and of the tax payable thereon were not ascertained at all by the Assessing Officer in respect of the transfer made by the assessee in favour of the firm on September 19, 1990, there obviously was no opinion formed in that regard and, consequently, there would not arise any question of a mere change of opinion. In cases where the Assessing Officer had overlooked something at the first assessment, there can, in our opinion, be no question of any change of opinion when the income which was chargeable to tax is actually taxed as it ought to have been under the law but was not, due to an error committed at the first assessment. The fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first assessment proceedings that he has found out. Therefore, unless it is shown that the Assessing Officer enquired into the matter at ill or that he never honestly believed that a mistake his been made, the result of his investigation and initiation of the proceedings under section 147 of the Act cannot be challenged on the ground of want of jurisdiction. The Assessing officer has to determine the facts and the law in order to give him jurisdiction to proceed and if in the determination of this he goes wrong, the proper remedy for the assessee would be to go up in appeal and to have the case referred to the High Court under the provisions of the Act. A writ of prohibition under article 226 cannot be issued against the Assessing Officer in such cases. As noted above, while narrating the facts, the Assessing Officer while making the assessment of a later year when capital gains arising out of the said transaction were disclosed, found in paragraphs 3, 4 and 5 of his order that the assessee and his three brothers had decided to from a partnership firm with two other partners from September 19, 1990 to develop the land and accordingly possession of the bungalow was taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily involved by the scope of his functions under the Income-tax Act, pursuant to the said provision of section 147. In view of the facts noted above, it is utterly impossible to say that there was no evidence of primary facts upon which the Assessing Officer may apply his mind and exercise his power and proceed further under the said provision. It is not for this court in exercise of its extraordinary jurisdiction under the Constitution, to examine the sufficiency of the reason which led the Assessing Officer to believe that the income had escaped assessment. In this view of the matter, the present petition is wholly misconceived and deserved to be rejected. The decision of this court in VXL India Ltd. v. Asst. CIT [1995]215 ITR 295, cannot assist the petitioner because in that case the assessment order, as held therein, did not disclose any reason as to why the Assessing Officer considered that taking into consideration the fluctuation of the exchange rate for the purpose of valuing the cost of asset was erroneous. It was held that the necessary conditions for issuing notice under section 148 read with section 147 of the Act were not satisfied. Similarly, in Birla VXI, L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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