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PATNA HIGH COURT
K.S.Paripoornan and N.K.Sinha JJ.
Dhanaraj Singh And Co.
Versus
Commissioner Of Income Tax
Civil Writ Jurisdiction Case No. 7510 of 1992 ; 7511 of 1992 ; 7512 of 1992 ;
Decided On : MARCH 04, 1994
INCOME TAX - Reopening of assessment - Conditions precedent - Assessee's failure to disclose material facts - Information obtained during subsequent assessment year - Whether sufficient to initiate proceedings - Held, no - Conditions precedent for reopening assessment under Sec. 147 read with Sec. 148 of the Income-tax Act not satisfied - Initiation of proceedings without jurisdiction.
Fact of the Case:
The petitioner-firm, a registered firm under the Income-tax Act, filed returns for the assessment years 1983-84, 1984-85 and 1985-86 and, after discussion with the Commissioner of Income-tax, filed revised returns under the Amnesty Scheme on September 30, 1986, with a covering letter. The returns were scrutinised by the Income-tax Officer, Ward-I(1), Patna, and the assessments were completed by him under the Amnesty Scheme itself under Sec. 143(3) of the Act on March 30, 1987, accepting the returned income. Thereafter, the petitioner was served with annexure-3 notice dated March 21, 1991, under Sec. 148 of the Income-tax Act stating that the second respondent had “reasons to believe” that the petitioners income chargeable to tax has escaped assessment within the meaning of Sec. 147 of the Act and, therefore, it is proposed to reassess the income for the said assessment year. This is for the year 1983-84. Similar notices were issued for the assessment years 1984-85 and 1985-86, dated March 26, 1992. Annexure-3 notice did not contain any particulars as to why it is stated that the income has escaped assessment.
Finding of the Court:
The court held that the conditions precedent for reopening assessment under Sec. 147 read with Sec. 148 of the Income-tax Act were not satisfied. The court found that the assessee had disclosed all the material facts necessary for its assessments for the relevant assessment years. The court also found that the Revenue had no case that it is any external source that provided the basis for reopening the assessments in this batch of three cases. The court further held that the availability of an alternate remedy, by way of appeals and reference which are likely to be lengthy proceedings, cannot be said to be an equally efficacious remedy. The court held that this is not a case wherein Sec. 150 of the Income-tax Act will apply.
Issues: Whether the conditions precedent for reopening assessment under Sec. 147 read with Sec. 148 of the Income-tax Act were satisfied.
Ratio Decidendi: The court held that the conditions precedent for reopening assessment under Sec. 147 read with Sec. 148 of the Income-tax Act were not satisfied. The court found that the assessee had disclosed all the material facts necessary for its assessments for the relevant assessment years. The court also found that the Revenue had no case that it is any external source that provided the basis for reopening the assessments in this batch of three cases. The court further held that the availability of an alternate remedy, by way of appeals and reference which are likely to be lengthy proceedings, cannot be said to be an equally efficacious remedy. The court held that this is not a case wherein Sec. 150 of the Income-tax Act will apply.
Final Decision: The court allowed the writ petitions and quashed the notices issued under Sec. 148 of the Income-tax Act.
K.S.Paripoornan, J.
1. This batch of three connected cases are filed by the same assesses, a firm, carrying on contract business. Common questions arise for consideration in this batch of three cases. The respondent is the Revenue. In this batch of cases, the petitioners assessments for the years 1983-84, 1984-85 and 1985-86 are sought to be reopened by the issue of a notice under Sec. 148 read with Sec. 147 of the Income-tax Act, 1961. The previous years relevant for the assessment years ended on March 31, 1983, March 31, 1984, and March 31, 1985. The writ applications relating to these C. W. J. C. Nos. 7512 of 1992, 7511 of 1992 and 7510 of 1992, respectively. Stated briefly, the attack is against annexure-3 notice issued under Sec. 148 of the Income-tax Act as one issued illegally and without jurisdiction. The notice under Sec. 148 read with Sec. 147 of the Income-tax Act for the year 1983-84 (annexure-3 in C.WJ.C. No. 7512 of 1992) is dated March 21, 1991. Similar notice for the year 1984-85 (annexure-3 in C. W. J. C. No. 7511 of 1992) is dated March 26, 1992, and for the year 1985-86 the notice is dated March 26, 1992 (annexure-3 in C. W. J. C. No. 7510 of 1992).
2. Substantially similar are the facts stated and dealt with by the petitioner and by the respondent/Revenue in the writ petition, in the counter-affidavits and in the rejoinder affidavits in all the three cases. C. W. J. C. No. 7512 of 1992 relating to the earliest assessment year 1983-84 was taken as the representative case and it was agreed at the Bar that the pleadings in the case may be taken as the basis for all the three years. Both sides proceeded on that basis. In appreciating the pleas raised before us, we have to bear in mind that the provisions of sections 147, 148 and 151 of the Income-tax Act, as they stood prior to the substitution of those sections by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, are the relevant statutory provisions governing the matter. For appreciating the controversy in this case, it is useful to quote sections 147, 148 and 151 of the Income-tax Act as they stood at the relevant time :
"147. Income escaping assessment--If - (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Sec. 139 for any assessment year to the Assessing 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 Assessing 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 underassessed; or
(b) where such income has been assessed at too low a rate; or
(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922); or
(d) where excessive loss or depreciation allowance has been computed.
Explanation 2. -- 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 this section.
148. Issue of notice where income has escaped assessment.-- (1) Before making the assessment, reassessm
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