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TMI Blog2019 (10) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... MRS MAUNA M BHATT (174) ORAL JUDGMENT ( PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Rule returnable forthwith. Ms. Mauna Bhatt, the learned standing counsel waives service of notice of rule for and on behalf of the respondent. 2. By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs:- 7. The petitioner, therefore, prays that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to: ( a) quash and set aside the impugned notice at Annexure' A' to this petition; ( b) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at Annexure' A' to this petition and stay the further proceedings for the Assessment Year 2011-12; ( c) any other and further relief deemed just and proper be grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out to the respondent that just because he had made an investment of ₹ 50,00,000/-, his case should not be reopened, as he could be said to have made full and true disclosure of his income. 5. The objections raised by the assessee ultimately came to be rejected vide order dated 08/10/2018. While rejecting the objections, the respondent observed as under: - 3.1 The contention of the assessee that no assessment can be reopened beyond the period of 4 years from the end of the assessment year unless there is failure on part of the assessee to disclose truly and fully all the materials facts necessary for the purpose of framing the assessment is not acceptable. The case of the assessee has been reopened after following prescribed procedure laid down under the Incometax Act after recording reasons for reopening the assessment and after taking prior approval of the competent authority notice u/s.148 of the Act was issued. Therefore, the impugned notice u/s.148 of the Act is contrary to law. Further, the assessee has stated neither discussed the information, which has led to form the belief that some income has escaped assessment. The Reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble material leading to the conclusion that there was escapement of income from assessment. In the objection filed, the assessee has heavily relied on various judicial pronouncements. The same were gone through and it is observed that the said decisions are not squarely applicable in assessee's case. As regards the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator India Ltd. 320 ITR 561, relied upon by the assessee, the said decision is not applicable for the reason that the reasons for which the case was reopened have never been disclosed by the assessee at any point of time as the assessment is being made for the first time. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of IndoAden Salt Manufacturing and Trading Co.(P) Ltd. Vs. Commissioner of Incometax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it had not disclosed true facts which the ITO could have found by further probing, the reopening of the assessment was valid. In the case of Shree Krishna (P) Ltd. Vs. Incometax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. He further submitted that the assessee had salary income from other sources and capital gains. In such circumstances, the assessee was required to file the ITR 2 for A.Y.2011-12. According to Mr. Himani, the Form ITR2, at the relevant point of time, did not include any column for the disclosure of investment. According to Mr. Himani, if the assessee was not obliged to disclose such information in the ITR2, then he could not be said to have concealed his income or cannot be deemed to have failed or omitted to disclose fully and truly all the material facts necessary for his assessment. 9. Mr. Himani pointed out that the very basis for reopening is the information received from the ITO (I CI), Ahmedabad dated 27/03/2018. Mr. Himani pointed out that if the socalled information had been received on 27/03/2018, it is quite strange as to how such information received on 27/03/2018 could have been made the basis for recording reasons for reopening on 15/03/2018. 10. Mr. Himani submitted that reopening is not permissible for carrying out roving and/or fishing inquiry or investigation, without there being any specific finding as to escapement of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment. Reason to believe refers to the prima facie or tentative belief which the Assessing Officer is required to form at the time of recording the reasons and issuing the notice u/s.148 of the Act. I submit that the assessing officer has formed a belief that the petitioner made investments to the tune of ₹ 50 lac in the pension policies of LIC of India which have remained unexplained. I submit that there is a live ling between the formation of belief and the information made available to the assessing officer. The petitioner has also contended that the petitioner had substantial funds to make such investments and the reopening is based on surmises and assumptions. The aforesaid contention is denied. I submit that at the time of recording reasons for reopening the assessment, the Assessing Officer is expected to form only a prima facie opinion or belief regarding the applicability of the provision in question. At that stage, it is not necessary for the assessing officer to conclusively establish that his belief or opinion is correct even on the merits. The merits of the matter will have to be decided in the course of the assessment proceedings after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence or conclusion. The merits of the matter will have to be decided in the course of the assessment proceedings after hearing the petitioner and in accordance with law. ( VI) With reference to para no.3.3.2, the contention of the petitioner that particular transaction entered into by the petitioner need not necessarily result into any income in the hands of petitioner does not have any bearing on the challenge to the validity of the impugned notice issued under Section 148 of the Act. I submit that the issue is with regard to the genuineness of transaction and creditworthiness of the petitioner to make huge investments in the pension policies of LIC. (VII) With reference to paras no.3.4 to 3.4.2, the petitioner contention that there is no cause and effect relationship between reasons recorded and income escaping assessment is baseless and denied. The submission made in the foregoing paragraphs are reiterated. ( VIII) With reference to para no.3.5, the petitioner's contention that reopening is based on borrowed satisfaction is denied. I submit that the respondent has independently applied his mind to the information received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of the belief should be present. The reasons must be self evident, they must speak for themselves. ( vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. ( vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. ( viii) If the original assessment is processed under Section 143(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment. ( ix) In order to assume jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. ( xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a bona fide belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. ( xvi) The concept of change of opinion has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. ( xvii) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assesee's profits have escaped assessment or have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 15. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the respondent is justified in reopening the assessment for the A.Y. 2011-12. 16. It is not in dispute that the form of return of income i.e. ITR2, then in force had no separate column for the disclosure of any investment. The question is whether the assessee was under any legal obligation to disclose about his investment of ₹ 50,00,000/- in the LIC policies. In the aforesaid context, we would like to refer to and rely upon a decision of the Supreme Court in the case of CIT Vs. Smt. P.K. Kochammu Amma reported in [1980] 125 ITR 624 (SC) . Page 13 of 22 Downloaded on : Fri Oct 04 18:53:51 IST 2019 C/SCA/17021/2018 JUDGMENT 17. In that case, the assessee filed her return for the assessment year 196465, disclosing therein income from property and income from other sources an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se total income during the previous year exceeds the maximum amount which is not chargeable to incometax, shall furnish a return of his income in the prescribed form and verified in the prescribed manner, and setting forth such other particulars as may be prescribed. The return of income is required to be filed in order to enable the Revenue authorities to make a proper assessment of tax on the assessee. It must, therefore, follow a fortiori that the assessee must disclose in the return every item of income which is liable to be taxed in his hands as part of his total income. The charge of incometax is levied by Section 4 on the total income of the assessee, and 'total income' is defined in Section 2, Subsection (45), to mean 'the total amount of income referred to in Section 5 computed in the manner laid down' in the Act. It is no doubt true that the definition of 'total income' in Section 2, Subsection (45), refers to Section 5 and this latter provision lays down that all income, profits and gains accrued or arising to the assessee or received by or on behalf of the assessee shall be liable to be included in his total income but this provision is subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62, did not contain any column for showing the income of the spouse and minor child which was liable to be included in the total income of the assessee under Section 64, Subsection (1), Clauses (i) and (iii), and there was, therefore, no obligation on the assessee to disclose this income in the returns filed by her. This contention is also, in our opinion, fallacious and deserves to be rejected. It is true that the form of return prescribed by Rule 12, which was in force during the relevant assessment year did not contain any separate column for showing the income of the spouse and minor child liable to be included in the total income of the assessee, but did contain a note stating that if the income of any other person is includible in the total income of the assessee under the provisions, inter alia, of Section 64, such income should also be shown in the return under the appropriate head. This note clearly required the assessee to show in the return under the appropriate head of income, namely, 'profits and gains of business or profession', the amounts representing the shares of the husband and minor daughter of the assessee in the profits of the two partnership firms. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed, that this decision lays down the correct law on the subject, and had it not been for the fact that since July 1, 1972, the form of the return prescribed by Rule 12 has been amended and since then, there is a separate column providing that 'income arising to spouse/minor child or any other person as referred to in Chapter V of the Act' should be shown separately under that column and consequently there is no longer any scope for arguing that the assessee is not bound to disclose such income in the return to be furnished by him, we would have referred the present case to a larger Bench. But we do not propose to do so since the question has now become academic in view of the amendment in the form of the return carried out with effect from July 1, 1972. We would, therefore, follow this decision in Muthiah Chettiar's case , which being a decision of a Bench of three judges of this court, is binding upon us, and following that decision, we hold that the assessee could not be said to have concealed her income by not disclosing in the return filed by her the amounts representing the shares of her husband and minor daughter in the two partnership firms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellant Assistant Commissioner. The Revenue went in appeal before the High Court. The High Court framed the following two substantial questions of law for consideration:- 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee was under no obligation to disclose in her return of income, the income of her minor daughter? 2. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 64(4) of the Incometax Act, 1961, the Tribunal misdirected itself in law in holding that the Income-tax Officer was not justified in reopening the assessment of the assessee under Section 147(a) of the Income-tax Act, 1961, in respect of her omission or failure to disclose the income of her minor daughter in her own assessment ? 21. The first question came to be answered in the affirmative and the second question in the negative and both in favour of the assessee. The observations made by the learned Judge of the Calcutta High Court are as under:- 10. Mr. Bajoria, learned counsel for the assessee, contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions remained in force. 13. The return form which has been prescribed by the said Amendment of 1967 Rules, also contains a note which is as follows : 3. If the income of any other person is includible in your total income under the provisions of Section 60, 61, 62, 63 or 64 of the Incometax Act, 1961, such income should also be shown in this return under the appropriate heads. 14. But no separate column has been provided for inclusion of the income under Section 60, 61, 62, 63 or 64 of the Incometax Act, 1961. 15. The rules were amended by the Incometax (Amendment) Rules, 1971, which came into force on April 1, 1971. In the return form prescribed by the Rules, there is no separate column indicated but only a note was appended being Note No. 1 which is as follows : If the income of any other person is includible in your total income under the provisions of Section 60, 61, 62, 63 or 64 of the Incometax Act, 1961, such incomes should also be shown separately in this return under the appropriate heads. 16. Surprisingly, even after the judgment of the Supreme Court in V.D.M.RM.M.RM. Muthiah Chettiar v. CIT [196 ..... 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