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TMI Blog1990 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... her proceedings in the High Court. Out of the said sum of Rs. 3,21,207 a sum of Rs. 41,490 is in respect of fees paid to counsel, which relate to criminal revision proceedings for quashing criminal prosecutions launched by the Income-tax Department against the assessee-bank. The remaining amount of Rs.2,79,717 exclusively relates to fees paid to lawyers in respect of various writ petitions, which the assessee-bank filed in the High Court at Calcutta challenging the jurisdiction of the Income-tax Officer to issue notices under sections 148 and 142(1) of the Act. The proceedings in respect whereof the assessee made the said payment to various lawyers are reported in Grindlays Bank Ltd. v. ITO [1978] 115 ITR 799 (Cal) and Grindlays Bank Ltd. v. ITO [1979] 116 ITR 710 (Cal). The assessee claimed the said amount by way of deduction under section 37 of the Act. In making the assessment, the Income-tax Officer allowed only Rs. 41,490 out of the total claim of Rs. 3,21,207 ; of the balance sum of Rs. 2,79,717, the Income-tax Officer restricted the allowance to Rs. 5,000 by applying section 80VV of the Act. On appeal, the Commissioner of Income-tax (Appeals) sustained the said order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenging the notice issued under section 148 of the Income-tax Act, 1961, in respect of the assessment years 1958-59, 1966-67 to 1970-71. The two writ petitions were disposed of by a common judgment because identical questions of fact and law arose in both the cases. The case of the assessee was that although all the relevant and material facts were before the original Assessing Officer, there was no non-disclosure of any material fact on the basis of which reassessment proceedings could have been initiated for the aforesaid assessment years. It was held by T. K. Basu J (at page 723) : "I am of the opinion, after going through the records and the correspondence, that the Income-tax Officers at the time of the original assessments were fully aware of the various items of claim as part of the head office expenses. If some item was wrongly allowed as a deduction, it was entirely due to an error on the part of the Assessing Officer and cannot be held to be due to any omission or failure on the part of the assessee. It is pointed out that any alleged information with regard to the reorganisation and with regard to the head office expenses in connection with the assessment year 1971-72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (c) for any advice in connection with tax, penalty, interest or any other matter under this Act." It is the contention of Dr. Pal that the scope of section 40A(12), which was introduced by the Finance Act, 1985, with effect from April 1, 1986, is much wider than the provisions of section 80VV which were introduced to prevent allowance of expenditure over the stated limit in respect of tax, penalty, interest or any other matter under this Act. Therefore, if any expenditure has been incurred after April 1, 1986, in connection with any matter under the Income-tax Act, 1961, that expenditure will not be allowable irrespective of the nature of the expenditure. But in the instant case in view of the limited language of section 80VV the assessee's claim for allowance of expenditure incurred in connection with section 148 has to be allowed. I am of the view that the contention of the assessee must be upheld. The writ petitions were filed challenging the validity of the initiation of proceedings under section 148 of the Income-tax Act, 1961. After the assessment is over, the Income-tax Officer becomes functus officio and he cannot reopen the assessment except under very limited c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment that was being made in India. A notice under section 142(1) is not a jurisdictional notice. It is part of the proceedings for computation of income under section 143. It is merely a step taken for the purpose of determination of the total income of the assessee under the Income-tax Act. The assessee might have had good reasons for feeling aggrieved by the notice. But the point remains that a notice under section 142 is issued in connection with and for the purpose of assessment proceedings. It is a step taken for the purpose of computation of income of the assessee and ascertaining the assessee's tax liability. If the issuance of a notice is challenged by the assessee then in effect the assessee is challenging the assessment proceedings. Therefore, the expenditure incurred for the purpose of proceedings taken to quash the notice under section 142(1) comes within the mischief of the proceedings of section 80VV. The Federal Court in the case of Chatturam v. CIT [1947] 15 ITR 302 observed (at page 308): "The liability to pay the tax is founded on sections 3 and 4 of the Income-tax Act, which are the charging sections. Section 22, etc., are the machinery sections to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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