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TMI Blog2009 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... like clove, Dalchini, Gambier, shoe-lining, marble and its sale in the local market, and also in export of gold jewellery. Income tax returns were filed in respect of the aforestated five assessment years and they were processed under Section 143(1) of the Act for the assessment years 1997-98, 1998-99 and 1999-2000 and intimations were given to the assessee. However, the assessment for the next two subsequent years i.e. for the assessment years 2000-01 and 2001-02 were completed after scrutiny of the account books under Section 143(3) of the Act, vide two assessment orders, both dated 6-3-2003. The petitioner, along with income tax return, also enclosed audit certificate in form no. 10CCAC, certifying all particulars of export profits and the claim under Section 80HHC of the Act. The petitioner for the assessment year 2000-01, on the profits shown at Rs. 19,67,675/-, claimed deduction of Rs. 13,20,894/- under Section 80 HHC of the Act . Thus, the net taxable income was shown at Rs. 6,69,580/-. The other fact which may have some bearing for the assessment years 1997-98, 1998-99 and 1999-2000 is that the premises of the petitioner was searched by the authorities of the Income Tax D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words, the submission is that where a 'block assessment order' has been passed, the law does not envisage initiation of reassessment proceedings by taking recourse to Sections 147 and 148 of the Act. Along with supplementary affidavit filed with application dated 25-5-2009, a copy of the block assessment order dated 25-2-2003 has been annexed. A counter affidavit has been filed on behalf of the respondents wherein it has been stated that it is not correct to say that the reasons for reopening the assessment proceedings were recorded subsequent to issuance of notice under Section 148 of the Income Tax Act. The assessee was only provided a copy of the reasons subsequently, after issuance of notice dated 26-3-2004. It has been further stated that reopening of the assessment proceedings is within the statutory period of limitation and the present writ petition is liable to be dismissed on the ground of availability of alternative remedy to the petitioner. The action has been sought to be justified on the ground that there is reason to believe that the income of the petitioner has escaped assessment in the relevant assessment years in as much as excessive deduction under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Court in an application under Article 226 of the Constitution as held in Daulatram Rawatmal v. ITO (1960) 38 ITR 301 (Cal); Jamna Lal Kabra v. ITO, (1968)69 ITR 461(All) ; Calcutta Discount Co.Ltd. v. ITO , (1961) 41 ITR 191 (SC); C.M. Rajgharia v. ITO, (1975) 98 ITR 486, (Pat).. and Madhya Pradesh Industries Ltd. v. Income Tax Officer, (1965) 57 ITR 637 (SC). The words "has reason to believe" are stronger than the words "is satisfied". The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable or, in other words, it must be based on reasons which are relevant and material as held by the Apex Court in Ganga Saran & Sons P. Ltd. v. ITO, (1981) 130 ITR 1 (SC). The expression "reason to believe" in Section 147 does not mean purely subjective satisfaction on the part of the Assessing Officer. The belief must be held in good faith; it cannot be merely a pretence. It is open to the Court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he formation of the belief and should not be extraneous or irrelevant. Further this Court in proceedings under Article 226 of the Constitution of India can scrutinize the reasons recorded by the Assessing Officer for initiating the proceedings under Section 147/148 of the Act. The sufficiency of the material cannot be gone into but relevancy certainly be gone into. In the present case, it is apt to notice the reasons recorded by the authority for initiation of reassessment proceedings, which is as follows, (excluding the charts showing various figures in the concerned assessment years as well as the computation of 80HHC using both the formulas):- " The above assessee files its return in this Circle. While proceeding with the assessment for A.Y. 2002-03, the assessee was queried regarding the details of export as it was noted that the assessee purchases gold from local markets and then makes value addition to it before exporting the same. In reply to the queries, the assessee provided copies of various invoices and other documents related to exports. It was noted from these papers that the assessee has included 'making charges' in the invoices thereby showing that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has claimed a deduction of Rs. 13,20,894/- U/s 80 HHC instead of claiming only Rs. 35,554.23, thereby reducing his income. Further the assessee has also not included the effect of "Export Incentives" in its computation whereas he has been getting the benefit of export licence benefit in the form of replenishment of gold. The exact effect of the same shall also be material for computing his income. Accordingly, I have reason to believe that income has been computed incorrectly and as such has escaped assessment and notice U/s 148 of the I.T. Act, 1961 is being issued." Identical reasons have been recorded for all the assessment orders with only variation of figures of deduction allowed under Section 80HHC and the amount which according to the department should have been allowed . A bare perusal of the reasons recorded by the Deputy Commissioner of Income Tax, Central Circle II, Kanpur shows that from the record it appears that the assessee is a "manufacturer" of gold ornaments, as according to the department, is established from the assessee's own explanation submitted on 17-1-2003 while explaining his export activities. The contention of the learned Senior Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the assessing officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been under-assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." The said Explanation on its plain language provides certain cases where income is chargeable to tax is deemed to be cases of escaped assessment and one of them is- where a return of income has been furnished by the assessee and assessment has been made, but the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion relating to investment in the construction of house. Explanation 2 to section 147 enumerates the cases where it shall be deemed that income chargeable to tax has escaped assessment. Clause (b) to Explanation 2 of section 147 provides that where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, it is one of the cases of deemed escapement of assessment. Therefore, the argument that the petitioner made all disclosures in the assessment proceeding regarding the income from the sale of shares by long term capital gains is of little consequence as the Assessing Officer has failed to examine the same." The aforesaid decision of this Court as well as the Full Bench decision of Delhi High Court given in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. (supra) came up for consideration before another Division Bench of this Court in Civil Misc. Writ Petition No. 181 (Tax) of 2004-M/S Ema India Ltd. Vs. Assistant Commissioner of Income Tax, Central Circle-1 wherein it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax, 1992 UPTC 96 it has been held that principle of res judicata is not applicable to Income Tax proceedings. In the absence of any material change, the Revenue is not justified to take a different view of the matter and the question of exemption under Sections 11 and 12 should not be reopened. The said decision has hardly any application to the controversy in hand and is distinguishable. More so, as mentioned in paragraph-18 of the report, the Apex Court has stated therein that the decision is confined to the facts of the case and cannot be treated as an authority on the aspects which have been decided by general application. Therefore, it cannot be treated as precedent. 2. M/S Indra Prasth Chemicals Pvt. Ltd. Meerut and others Vs. Commissioner of Income Tax, Meerut and another, 2005 UPTC 53 was a case where on facts it was found by the Court that there was no material for formation of belief that the income has escaped and as such, the notices were held to be invalid and without jurisdiction, which is not so here. 3. Universal Subscription Agency P. Ltd. Vs. Joint Commissioner of Income Tax, (2007) 293 ITR 244 (Allahabad) is also distinguishable on facts as it was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been pleaded that the reasons to initiate reassessment proceedings were recorded subsequently i.e. after issuance of the notice, but no such argument was raised during the course of hearing of the writ petition. We find that in the counter affidavit it has been stated that the reasons were recorded earlier before issuance of the impugned notices. This being so, in the absence of any argument in this behalf, the plea sought to be raised in the writ petition stands concluded against the petitioner. Now, we take up the second issue raised by the learned Senior Counsel for the petitioner. The facts relevant to the said issue may be noticed in brief. The assessments for the assessment years 1997-98, 1998-99 and 1999-2000 were completed under Section 143(1) of the Act, meaning thereby the assessment was finalised without any scrutiny by the assessing officer. The business premises of the petitioner was searched on 3-2-2000 by the Income Tax authorities as disclosed in the supplementary affidavit dated 29-5-2009. As a result thereof, proceedings for block assessment under Section 158 BC of the Act for the assessment years 1990-91 to 1999-2000 and 2000-01 for the previous year ending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the search under Section 132 or the requisition of documents under Section 132A of the Act. The Kerala High Court in the case of Malayil Bankers v. Assistant Commissioner of Income Tax, (1999) 236 ITR 869, the Gujarat High Court in the case of Commissioner of Income Tax v. Shambhulal C. Bachkaniwala, (2000) 245 ITR 488 and the Calcutta High Court in the case of Deputy Commissioner of Income Tax and others v. Shaw Wallace and Co. Ltd., (2001) 248 ITR 81, has taken the view that in view of the plain language of Section 158BA of the Act and the explanation thereto, the Assessing Officer is not debarred from framing an assessment under Section 143 even where an assessment has been framed for a block period under Section 158BC of the Act. Thus, we are of the opinion that even where an assessment for a block period has been made or is to be made under Chapter XIVB of the Act, regular assessment proceedings including re-assessment under Chapter XIV of the Act are not barred. This would also be clear from a reading of sub-section (1) of Section 158BB of the Act. Prior to substitution of the phrase "in accordance with the provisions of Chapter IV, on the basis of evidence found as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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