9911796707
TMI Blog2008 (11) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... y received by the petitioner in the relevant year. By a letter dated 05.03.2001 (Annexure P-2) the petitioner submitted various details including bank statements, particulars of cheques received towards share application money and confirmation relating to the share application money received during the year from Hallmark Healthcare Limited. The assessment was completed on 07.03.2001 under Section 143 (3) of the said Act at nil income and the assessee was allowed to carry forward its unabsorbed depreciation of Rs 20,21,235/-. In the assessment order the Assessing Officer specifically noted that:- "In compliance to departmental notices assessee's representative Sh. V. K. Goel, C.A appeared from time to time. Details as required were filed and verified." (underlining added) 3. Thereafter, on 29.03.2004 the impugned notice under Section 148 of the said Act was issued by the Assistant Commissioner of Income Tax. The notice indicated that the said officer had reason to believe that income in respect of which the petitioner was assessable and chargeable to tax for the assessment year 1998-1999 had escaped assessment within the meaning of Section 147 of the said Act. The notice also requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etail later in this judgment, action under Section 147 can be taken after the expiry of four years from the end of the relevant year only if any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to:- (a) Make a return under Section 139 or in response to a notice under sub-section (1) of Section 142 or Section 148; or (b) to disclose fully and truly all material facts necessary for his assessment, for that assessment year. It is an admitted position that condition (a) referred to above, does not come into play in the present petition inasmuch as the assessee had made a return originally as well as in response to the Section 148 notice. What is necessary for an action under Section 147 in the present case is to not only show that income had escaped assessment but also that the assessee had failed to disclose fully and truly all material facts necessary for its assessment for that assessment year. A plain reading of the reasons indicated above, show that there is no allegation against the petitioner of failing to disclose fully and truly all material facts necessary for its assessment for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have been issued beyond the period of four years from the end of the relevant assessment year, i.e, 1998-1999. It was further submitted that the reasons recorded on 29.03.2004 and supplied to the petitioner did not contain any allegation that there was any failure on the part of the assessee to disclose all the material facts truly and fully. It was contended that in the absence of any such allegation, the issuance of the notice under Section 148 beyond the period of four years, which expired on 31.03.2003, was wholly without jurisdiction. There were other objections taken with which we need not concern ourselves. The petitioner, therefore, requested that the proceedings initiated under Section 148 be dropped. 7. The Assistant Commissioner of Income Tax passed the impugned speaking order dated 02.03.2005. It is noteworthy that in the said order it is specifically mentioned as under:- "During the course of assessment proceedings, you have filed details in respect of share application money of Rs 5 lacs in the name of M/s Hallmark Healthcare Ltd during the course of assessment proceedings, photostat copies of letter head of M/s Hallmark Healthcare Ltd for application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." With regard to these directions given by the Supreme Court as to the proper course of action when a notice under Section 148 of the said Act is issued, two points need to be kept in mind. The first point is that the noticee has to file a return and the second is that, where the noticee seeks reasons for the issuance of the notice, the Assessing Officer is bound to supply the reasons within a reasonable time. Thereafter, the noticee is entitled to file objections and the Assessing Officer is bound to dispose of the same by a speaking order. In the present case, the notice under Section 148 was issued on 29.03.2004 and the petitioner submitted its reply dated 11.05.2004 stating that the return filed earlier be treated as the return filed pursuant to the notice. The petitioner also sought the reasons which had been record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the respondent therein to disclose fully and truly all material facts necessary for its assessment and the condition for the applicability of Section 147(a) [as it stood at that time] was not satisfied. The Supreme Court also held that its earlier decision in the case of CIT v. Burlop Dealer's Limited: 79 ITR 609 (SC) fully applied even though the same had been rendered in the context of Section 34 (1) (a) of the Income Tax Act, 1922. 10. The learned counsel for the petitioner also submitted that the reasons which had been supplied to the petitioner did not contain any allegation that material facts had not been truly and fully disclosed by the assessee at the time of assessment. Reliance was placed on the decision of the Punjab and Haryana High Court in the case of Duli Chand Singhania v. Assistant Commissioner of Income Tax: 269 ITR 192 (PandH). In that decision the High Court of Punjab and Haryana had noted that the sine qua non for assuming jurisdiction under Section 147 of the Act, in a case falling under the proviso thereto, was that there must be an allegation that the escapement of income had occurred by reason of failure on the part of the assessee to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18, New Delhi" It is apparent by comparing these purported reasons with the reasons extracted earlier and which had been supplied to the petitioner that the two are different. While in the reasons supplied to the petitioner there is no mention of the allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts, in the reasons shown in the said form in Annexure-A to the counter-affidavit, there is a specific allegation that there was failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from one of the companies of Sh. Sanjay Rastogi to the extent of Rs 5,00,000/-. In this context, the learned counsel for the petitioner submitted that the entire proceedings are vitiated inasmuch as the reasons which were supplied to the petitioner were different from what, according to the respondents, were the "true" reasons. Therefore, what was supplied to the petitioner cannot be regarded as the reasons and the entire process of filing of objections to those purported reasons and the impugned order dated 02.03.2005 would be in respect of something which, even as per the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year, on account of the failure on the part of the assessee to make a true and full disclosure of the primary facts during the proceedings of the concluded assessment. In this background, the Supreme Court observed:- "The judgment in Burlop Dealers' case cannot be understood as laying down any such proposition that even where the Income-tax Officer gets some fresh information which was not available at the time of the original assessment, subsequent to the conclusion of the original assessment proceedings, which enables him to form a reasonable belief that the income of the assessee had escaped assessment because of the omission or failure of the assessee to disclose true and full facts during the assessment proceedings, he cannot reopen the assessment. The observations in Burlop's case, noticed above, were made in the peculiar fact-situation of that case and cannot be construed to be of universal application irrespective of the facts and circumstances of the particular case." Mrs Bansal placed heavy reliance on the above observations as also on the following:- "Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer, at the time of making the original assessment, could or could not have found by further enquiry or investigation, whether the transaction was genuine or not if, on the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of the foregoing proviso. It is evident that the provisions of section 147, pre and post the 1989 amendment are different. Whether anything turns upon this difference, is discussed later in this judgment. 15. It was further contended on behalf of the respondents that though the assessee had disclosed the factum of the share application money of Rs 5,00,000/- received from Hallmark Healthcare Ltd, the same was not ?truly? declared and, therefore, the Assessing Officer had validly invoked the provisions of section 147 and had correctly issued the notice under section 148 of the said Act. 16. Mrs Bansal also submitted that this was not a case of mere change of opinion. She submitted that the expression change of opinion pre-supposes an opinion already formed by the Assessing Officer at the time of the assessment proceedings. She contended that the facts regarding the accommodation entries were not within the knowledge of the Assessing Officer at the time of the original assessment proceedings. The information was received by him only after completing the assessment under section 143(3) of the said Act. Therefore, the factum of the share application money wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms.? The territory of a proviso therefore is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. (Vide also Corporation of City of Toronto v. Attorney-General for Canada [(1946) AC 32, 37])? In Ali M.K. v. State of Kerala: (2003) 11 SCC 632, the Supreme Court made similar observations:- "10. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins v. Treasurer of Surrey [(1880) 5 QBD 170 : 42 LT 128] (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha [AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts ? 20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they now seek to rely. If the reasons in the said form were the 'actual' reasons, why were they not communicated to the petitioner Why was nothing said about these reasons (noted in the form) when the petitioner filed its objections to the reasons which were supplied to it' It must be remembered that in its objections, the petitioner took the specific plea that in the absence of any allegation that the petitioner had failed to disclose fully and truly all material facts necessary for assessment, the Assessing Officer had no jurisdiction to issue the notice under section 148 and initiate action under section 147 after four years from the end of the relevant assessment year. Despite this precise objection, there is no mention of the reasons noted in the said form in the impugned order dated 02.03.2005. If the respondents had regarded the reasons noted in the said form to be the 'actual' reasons, it would have been very easy for the Assessing Officer to have countered this objection by simply referring to the reasons noted in the form and saying that the allegation of failure to disclose is very much there. It is obvious that the reasons noted in the said form were never regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finalized on his mere whim or fancy and that he does so only on the basis of lawful reasons. These steps are also designed to ensure complete transparency and adherence to the principles of natural justice. Thus, a deviation from these directions would entail the nullifying of the proceedings. Assuming as we have done that the 'actual' reasons were those as noted in the said form, it is obvious that the reasons were never communicated to the petitioner and it is only for the first time in the course of the present writ petition that those 'reasons' have surfaced. Therefore, if he proceeded on the assumption that the 'actual' reasons were those as noted in the said form, the proper course of action as directed by the Supreme Court in GKN Driveshafts (supra), has not been followed. It would mean that the reasons which were supplied to the petitioner were not the actual reasons and the objections which were taken by the petitioner were not to the actual reasons and the speaking order dated 02.03.2005 which was passed was also neither on the basis of the actual reasons nor the objections to the actual reasons. The entire process would be a sham and would amount to making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment amounts to or is likely to amount to rupees one lakh or more for that year. This means that a notice under Section 148, in the present case, could not, in any event, have been issued after six years from the end of the assessment year 1998-99, i.e., after 31.03.2005. In whichever way we look at it, a notice under Section 148 without the communication of the reasons therefor is meaningless inasmuch as the Assessing Officer is bound to furnish the reasons within a reasonable time. In a case, where the notice has been issued within the said period of six years, but the reasons have not been furnished within that period, in our view, any proceedings pursuant thereto would be hit by the bar of limitation inasmuch as the issuance of the notice and the communication and furnishing of reasons go hand-in-hand. The expression 'within a reasonable period of time' as used by the Supreme Court in GKN Driveshafts (supra) cannot be stretched to such an extent that it extends even beyond the six years stipulated in Section 149. For this reason also, even assuming that we overlook all that has happened between 11.05.2004, when the petitioner sought the reasons, and 05.11.2007, when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause (a) of Section 147, the limitation was eight years from the end of the relevant assessment year unless the income chargeable to tax, which had escaped assessment, amounted to or was likely to amount to Rs 50,000/- or more for that year, in which case the period was 16 years. In respect of cases falling under clause (b) of Section 147, the period of limitation for issuing a notice under Section 148 was four years from the end of the relevant assessment year. Thus, the time limit for issuing a notice under Section 148 where the Income-tax Officer merely had information in his possession to believe that income chargeable to tax had escaped assessment was four years from the end of the relevant assessment year. On the other hand where the Income-tax Officer had reason to believe that income chargeable to tax had escaped assessment for any year and that such reason to believe was occasioned by the omission or failure on the part of an assessee to either file a return or to disclose fully and truly all material facts necessary for his assessment for that year, the period of limitation was either eight years or 16 years depending on whether the income said to have escaped a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary for his assessment for the assessment year 1998-99. Explanation I to Section 147 also makes it clear that mere 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 said proviso. This explanation, however, does not mean that production of account books and other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not 'in any event' amount to disclosure within the meaning of the said proviso. The said explanation only stipulates that such evidence will not necessarily 'amount to disclosure' within the meaning of the said proviso. However, we need not labour on this aspect any further inasmuch as we find that in this case, the Assessing Officer had made specific queries, inter alia, with regard to the share application money of Rs 5 lakhs received from Hallmark Healthcare Limited. The petitioner had supplied, in the course of the original assessment proceedings all the relevant documents such as the share application mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1.--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 income chargeable to tax has been under-assessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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