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High Court Of Calcutta
Murari Mohan Dutt, Ram Krishna Sharma
SOVA SARKAR - Appellant
Versus
INCOME-TAX OFFICER - Respondent
Appeal From Original Order 1 Of 1976
Decided On : 06/02/1977
INCOME TAX - ASSESSMENT - REOPENING - JURISDICTION - INVALID RETURN - INTERPRETATION OF SECTIONS 139, 143, 147, AND 148 OF THE INCOME TAX ACT, 1961 - HELD, AN INVALID RETURN CANNOT BE IGNORED BY THE INCOME TAX OFFICER (ITO) FOR THE PURPOSE OF ISSUING A NOTICE UNDER SECTION 148 UNLESS IT CAN BE REGARDED AS NOT A RETURN IN THE EYE OF LAW.
Fact of the Case:
THE APPELLANT, A GOVERNMENT CONTRACTOR AND ASSESSEE UNDER THE INCOME TAX ACT, 1961, FILED RETURNS FOR THE ASSESSMENT YEARS 1967-68, 1968-69, AND 1969-70 WITHIN THE PRESCRIBED PERIOD. HE WAS SERVED WITH A NOTICE UNDER SECTION 143(2) OF THE ACT, CALLING HIM TO APPEAR AND PRODUCE EVIDENCE IN SUPPORT OF HIS RETURNS. THE ITO HEARD THE APPELLANT AND EXAMINED THE DOCUMENTS SUBMITTED, BUT NO ORDER OF ASSESSMENT WAS PASSED, AND NO NOTICE OF DEMAND WAS SENT. LATER, THE APPELLANT RECEIVED AN INCOME TAX CLEARANCE CERTIFICATE WITH AN INSERTION STATING THAT THE RETURNS FILED FOR THE ASSESSMENT YEARS IN QUESTION WERE INVALID. THE APPELLANT WROTE TO THE ITO, OBJECTING TO THE INSERTION AND REQUESTING A FRESH CLEARANCE CERTIFICATE WITHOUT SUCH REMARKS. HOWEVER, THE ITO ISSUED THREE NOTICES UNDER SECTION 148, ALLEGING THAT THE APPELLANT'S INCOME HAD ESCAPED ASSESSMENT FOR THE SAID YEARS.
Finding of the Court:
THE HIGH COURT HELD THAT THE RETURNS FILED BY THE APPELLANT WERE NOT INVALID MERE BECAUSE THEY DID NOT INCLUDE CERTAIN PARTICULARS REGARDING THE PROFITS AND GAINS OF HIS BUSINESS. THE COURT FOUND THAT THE RETURNS WERE SIGNED AND VERIFIED BY THE APPELLANT AND COULD NOT BE DISREGARDED AS NON-EXISTENT. THE COURT FURTHER HELD THAT THE ITO HAD NO JURISDICTION TO ISSUE NOTICES UNDER SECTION 148 WITHOUT COMPLETING THE ASSESSMENT ON THE RETURNS FILED BY THE APPELLANT.
Issues: 1. WHETHER AN INVALID RETURN CAN BE IGNORED BY THE ITO FOR THE PURPOSE OF ISSUING A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961? 2. WHETHER THE ITO HAS JURISDICTION TO REOPEN AN ASSESSMENT UNDER SECTION 148 WITHOUT COMPLETING THE ASSESSMENT ON THE RETURN FILED BY THE ASSESSEE?
Ratio Decidendi: 1. AN INVALID RETURN, IN THE SENSE THAT IT IS NOT CORRECT AND COMPLETE WITHIN THE MEANING OF SECTION 139 OF THE INCOME TAX ACT, 1961, CANNOT BE IGNORED OR DISREGARDED BY THE ITO FOR THE PURPOSE OF ISSUING A NOTICE UNDER SECTION 148 OF THE ACT, UNLESS THE RETURN CAN BE REGARDED AS NOT A RETURN IN THE EYE OF LAW. 2. THE ITO HAS NO JURISDICTION TO REOPEN AN ASSESSMENT UNDER SECTION 148 WITHOUT COMPLETING THE ASSESSMENT ON THE RETURN FILED BY THE ASSESSEE.
Final Decision: THE HIGH COURT SET ASIDE THE JUDGMENT OF THE LOWER COURT AND MADE THE RULE ABSOLUTE. IT ISSUED A WRIT OF CERTIORARI QUASHING THE IMPUGNED NOTICES UNDER SECTION 148 OF THE INCOME TAX ACT, 1961, AND A WRIT OF MANDAMUS COMMANDING THE RESPONDENTS NOT TO GIVE ANY EFFECT TO THE SAID NOTICES OR ANY PROCEEDINGS STARTED THEREON.
( 1 ) THIS appeal is directed against the judgment of the learned trial judge, discharging the rule nisi obtained by the appellant on his petition under Article 226 of the Constitution.
( 2 ) THE appellant carries on his business as a government contractor, and he is an assessee under the I. T. Act, 1961. He filed his return for the A. Ys. 1967-68, 1968-69 and 1969-70, within the period prescribed therefor. He was served with a notice under Section 143 (2) of the I. T. Act, 1961 on May 25, 1971, whereby he was called upon by the ITO to appear and produce the relevant evidence in support of the returns filed by him. The date of hearing of the assessment proceedings was fixed as June 17, 1971, which was subsequently adjourned to September 22, 1971. On that date, the appellant was heard by the ITO. He produced before the ITO, the payment certificate in original as given to him by the government, the bank pass book and other relevant documents in connection with the hearing of the assessment proceedings. No order of assessment was, however, passed and no notice of demand was sent to the appellants. On June 15, 1973, the appellant made an application for an I. T. clearance certificate. On June 16, 1973, a certificate was given to the appellant by one P. K. Chatterjee, ITO, Project Circle, North Bengal, Siliguri. In para. A (ii), at page 2 of the certificate, it was inserted in ink by the said P. K. Chatterjee that the returns of income filed by the appellant for the assessment years 1967-68 to 1969-70 were invalid. It is the case of the appellant that on coming to know of the said insertion, he, by his letter dated August 22, 1973, addressed to the said ITO, stated that all the returns in question were submitted by him in time, but he was not informed of the alleged invalidity of the returns filed by him. Further, it was stated by him in the said letter that he was not given any opportunity of being heard as to the alleged invalidity of the returns and requested the ITO to issue to him a fresh income-tax clearance certificate without any such remark.
( 3 ) THE appellant did not receive any reply to his said letter dated August 22, 1973, but on March 18, 1974, he was served with three notices under Section 148 of the I. T. Act, 1961, all dated March 14, 1974, and issued by the said P. K. Chatterjee, wherein it was alleged that the ITO had reasons to believe that the income of the appellant, chargeable to tax for the A. Yrs. 1967-68, 1968-69 and 1969-70, had escaped assessment within the meaning of Section 147 of the Act, and the appellant was called upon to file returns for the said assessment years within 30 days of the date of the receipt of the notices. Immediately on receipt of the aforesaid notices, on March 29, 1974, the appellant wrote to the ITO contending, inter alia, that since the returns for the said assessment years were already submitted by him and the assessment proceedings were pending, the ITO had no jurisdiction to issue notices under Section 148 of the Act. It was the case of the appellant that there was absolutely no material before the ITO on which he could form a reasonable belief that the appellant's income had escaped assessment for the said assessment years or that the alleged escapement of income was on account of any omission or failure on the part of the appellant to file his returns for the assessment years in question. By a writ petition, the appellant challenged the legality of the said notices under Section 148 of the Act.
( 4 ) THE respondents filed an affidavit in opposition which was sworn to by the ITO, respondent No. 2. The respondents admitted the filing of the returns by the appellant for the said assessment years. It was, however, alleged that on a scrutiny of the returns, the ITO found that the particulars of profits and gains from business were not submitted by the appellant along with the returns, although in the note appended to the annexure to each return it was clearly
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