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TMI Blog1976 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ce at Bhiwani and branches at Jaipur, Bikaner, Delhi and Narnaul. On March 21, 1966, Income-tax Officer, Central Circle III, Delhi, issued the following notice under section 148 of the Act of 1961 to the petitioner . " Whereas I have reason to believe that your income chargeable to tax for the assessment year 1949-50 has escaped assessment within the meaning of section 147 of the Income-tax Act 1961. I, therefore, propose to reassess / recompute the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of the service of this notice, a return in the prescribed form of your income in respect of which you are assessable for the said assessment year. 2. This notice is being issued after obtaining the necessary satisfaction of the Central Board of Revenue." On receipt of the above notice the petitioner filed a return stating that notice under section 148 was illegal and no income had escaped assessment. It was added that the income of the petitioner was the same as assessed originally. In a further communication, it was stated that the return was being filed under protest and that notice under section 148 was barred by tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section : Provided that-- (i) the Income-tax Officer shall not issue a notice under this sub-section, unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in section 149 or section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly." Section 34 of the Act of 1922 has been split up into sections 147 to 153 in the Act of 1961. Section 147 provides : " If-- (a) the Income-tax Officer has reason to believe 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 assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpired on March 31, 1958, the Income-tax Officer cannot take the benefit of the extended period of limitation of sixteen years as prescribed by section 149 of the Act of 1961. It is urged that section 297(2)(d)(ii) should not be construed as might have the effect of reviving rights of the Income-tax Officer to reopen assessment which rights had become extinguished and barred under the old Act. Reference in this context is made to the case of J. P. Jain, Income-tax Officer v. Induprasad Devshanker Bhatt [1969] 72 ITR 595 (SC) decided by the Supreme Court on August 20, 1968. In this case their Lordships affirmed the judgment of the Gujarat High Court whereby a notice under section 148 of the Act of 1961 issued by the Income-tax Officer had been quashed. Reference on behalf of the petitioner has also been made to the case of Darshan Singh Chawla v. Income-tax Officer (Civil Writ No. 65D of 1966) decided by Kapur J. on August 12, 1966. In the case of Induprasad Devshanker Bhatt [1969] 72 ITR 595 (SC) the amount of escaped income was determined by the Income-tax Officer to be Rs. 89,000 while in the case of Darshan Singh Chawla (Civil Writ No. 65D of 1966) it was decided to be Rs. 72,13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be), or (b) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer acquires jurisdiction to issue notice under section 148 of the Act of 1961 or section 34 of the Act of 1922. Ramaswami J., speaking for the court, observed in the case of S. Narayanappa v. Commissioner of Income-tax [1967] 63 ITR 219, 221, 222 (SC) : " But the legal position is that if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under section 34. Whether these grounds are adequate or not is not a matter for the court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. It is of course open for the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment of the assessment year 1949-50 by means of a notice issued in 1966, he has in his affidavit given no inkling of the reasons for his belief that there had been omission or failure on the part of the assessee to disclose fully and truly ill material facts necessary for the assessment for that year. Mr. Kirpal, on behalf of the respondents Nos. 1 to 3, has urged that it was not necessary for the Income-tax Officer to refer to the material in his affidavit because such material is indicated by notices dated July 15, 1966, August 3/4, 1966, and August 22/27, 1966, which were issued by the Income-tax Officer to the petitioner. The last two of them purported to be under section 143(3) of the Act of 1961. The provision under which notice dated July 15, 1966, was issued has not been specified but it is stated by Mr. Kirpal that that notice too was under section 143(3) of the above mentioned Act. In these notices the Income-tax Officer called upon the petitioner to furnish information and explanation in respect of a number of matters. Although there are indications in these notices that certain income had escaped assessment, there is nothing in these notices to show that the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all material facts necessary for the assessment. Notice under section 143(3) would normally not contain such material as the object of issuing such notice is only to ask for further evidence on specified points for making proper assessment. The Income-tax Officer, at the stage of issuing notice under section 143(3), is not concerned with past failure or omission on the part of the assessee to disclose material facts. Keeping in view the scope and object of notice under section 143(3) of the Act of 1961 as well as the contents of the notices under that section referred to by Mr. Kirpal, I am of the view that the respondents have failed to show any material on the basis of which the Income-tax Officer could have formed the belief that the income had escaped assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts. During the pendency of the writ petition the petitioner filed application for admission of additional evidence consisting of three documents. One of those documents is an order dated February 17, 1966, made by the Income-tax Officer under section 132(5) of the Act of 1961, while the other is an order dated A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment for the year 1949-50 was made by an order dated 31st January, 1952. It was then stated in paragraph 8 of the writ petition that on 21st of March, 1966, a notice had been issued under section 148 of the Act " on the unfounded allegation that the income chargeable to tax for the assessment year 1949-50 had escaped assessment within the meaning of section 147 of the Act of 1961 ". After receiving the notice the respondents filed a return dated 25th April, 1966, in order to avoid an ex parte assessment. It is stated in paragraph 9 of the writ petition that there were inadvertent omissions of important legal objections and a revised return was filed on the 9th of September, 1966. A copy of the revised return was filed as annexure " D " with the writ petition. A note was made on the revised return to the effect : " Under protest. No income has escaped assessment. The notice under section 148 is illegal and barred by time." The writ petition was later on allowed to be amended so as to contain further facts and grounds. It is clear that the revised return dated 9th of September, 1966, itself contained two objections. The first was that the return was being filed under protest a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistance could be derived from the authorities cited before him because, according to the affidavit filed on behalf of the present appellants (respondents to the writ petition), the escaped income in the case was more than Rs. 1 lakh for the assessment year 1949-50. It was noticed that in respect of the escaped income of over a lakh of rupees the Act of 1922 did not prescribe any period of limitation. It was hold that the Income-tax Officer by issuing the notice under section 148 of the Act was not trying to re-open an assessment in a case where the right to re-open it had become barred under the old Act. The finding on the first contention raised before the learned single judge has not been questioned before us. Even otherwise, we are in agreement with the same. The main contention raised before us is that the learned single judge should not have held that the appellants had failed to substantiate the validity of the notice issued under section 148 of the Act because the Income-tax Officer, while issuing it had sufficient material before him on the basis of which issuing reason to believe that by reason of omission or failure on the part of the assessee to make the return u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a notice under sub-section (2) of section 139 and the provisions of this Act shall, so far as may be, apply accordingly, as if the notice were a notice issued under that sub-section. (2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so." " 149. (1) No notice under section 148 shall be issued,-- a) in cases falling under clause (a) of section 147-- (i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (ii) ; (ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year : (b) in cases falling under clause (b) of section 147, at any time after the expiry of four years from the end of the relevant assessment year. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the notice under section 148, the Income-tax Officer has to record his reasons for issuing the notice. The satisfaction accorded by the Board under section 151 does not provide any substitute and the Income-tax Officer is not relieved of the obligation imposed by section 148(2) which becomes imperatively necessary in order to establish on the record the reasons for which the Income-tax Officer may be issuing the notice under section 148 of the Act. It must be appreciated that where an assessment is sought to be reopened in terms of section 147 of the Act, the assessee would be in the position as if no assessment had been made for the relevant year. The provisions, quoted above, contain in them the legislative care and anxiety that assessment, reassessment or recomputation under section 147 may be made only after the requirements imposed by the statute as pre-requisites have been complied with. An examination of section 147 itself leads to the conclusion that : (a) Before acting under it the Income-tax Officer should have reason to believe that action is to be taken. (b) The Income-tax Officer's " reason to believe " must be based on the conclusion that the income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he should act in terms of section 147 for issuing the notice under section 148 and the counsel urged that although the notice under section 148 had been issued on 21st March, 1966, the income-tax department was not prepared to show the material which existed before that date with the Income-tax Officer and that the learned judge was to confine himself to the averments in the notices subsequently issued to the respondents to this appeal. In that particular situation referring to those notices, the learned single judge observed : " The last two of them purported to be under section 143(3) of the Act of 1961. The provision under which notice dated July 15, 1966, was issued has not been specified but it is stated by Mr. Kirpal that that notice too was under section 143(3) of the above-mentioned Act. In these notices the Income-tax Officer called upon the petitioner to furnish information and explanation in respect of a number of matters. Although there are indications in these notices that certain income had escaped assessment, there is nothing in these notices to show that the income had escaped assessment by reason of omission or 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
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