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High Court Of Calcutta
Subhro Kamal Mukherjee
MERCURY TRAVELS LTD. - Appellant
Versus
DEPUTY COMMISSIONER OF INCOME TAX - Respondent
Writ Petn. 2682 Of 1997
Decided On : 09/12/2002
INCOME TAX - Reassessment - Escapement of assessment - Conditions precedent - Disclosure of primary facts - Jurisdiction of AO - Section 147 and 148 of the Income Tax Act, 1961.
Fact of the Case:
The assessee, a travel agency and tour operator, claimed deductions under Section 80hhd of the Income Tax Act, 1961, for the assessment years 1989-90, 1990-91, and 1991-92. The AO allowed the deductions and passed orders of assessment under Section 143(3) of the Act. Subsequently, the Dy. CIT issued notices under Section 148 of the Act, alleging escapement of assessment. The assessee challenged the notices, arguing that there was no omission or failure to disclose material facts and that the AO had all the necessary information to make the original assessments.
Finding of the Court:
The High Court held that the assessee had disclosed all the primary facts necessary for the assessment and that there was no omission or failure on its part to disclose fully and truly all the material facts. The Court further held that the reasons recorded by the AO for reopening the assessments were not sufficient to satisfy the requirements of Section 147 of the Act and that the notices issued under Section 148 were illegal and without jurisdiction.
Issues: 1. Whether the assessee had disclosed all the primary facts necessary for the assessment? 2. Whether the reasons recorded by the AO for reopening the assessments were sufficient to satisfy the requirements of Section 147 of the Act?
Ratio Decidendi: 1. The Court held that the assessee had disclosed all the primary facts necessary for the assessment, as it had submitted certificates from a chartered accountant in the prescribed forms claiming the deductions under Section 80hhd. The Court relied on the Supreme Court's decision in Calcutta Discount Co. Ltd. v. ITO, which held that the assessee is not required to disclose inferences of facts or law, and that it is for the AO to draw inferences from the primary facts. 2. The Court held that the reasons recorded by the AO for reopening the assessments were not sufficient to satisfy the requirements of Section 147 of the Act, as they did not allege any omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. The Court also held that the AO could not reopen the assessments merely because he had changed his opinion on the matter.
Final Decision: The Court allowed the writ petition and quashed the three notices issued under Section 148 of the Income Tax Act, 1961, and all the proceedings relating thereto.
( 1 ) IN this application under Article 226 of the Constitution of India (the writ petition in short), the writ petitioner questioned three notices issued under Section 148 of the IT Act, 1961 (the said Act in short), dt. 26th Sept. , 1996, for the asst. yrs. 1989-90 and 1990-91 and dt. 20th Sept. , 1996, for the asst. yr. 1991-92.
( 2 ) THE relevant facts for the disposal of the writ petition are summarised as under: (a) The petitioner, a public limited company, is engaged in businesses of travel agency and tour operation. The petitioner is an agent of the airlines for selling air tickets and for rendering such services, it receives commission from such airlines. Similarly, the petitioner acts as an agent for various hotels and it gets commission from such hotels for booking accommodations on behalf of the clients of the petitioner. Apart from the aforesaid businesses of acting as the agent of airlines and of hotels, the writ petitioner, also carries on business of tour operation. The writ petitioner, however, receives only the amount of commission, which the writ petitioner is entitled to receive from the said airlines and the hotels for rendering its services as the agent. (b) Section 80hhd of the IT Act, 1961, was inserted by the Direct Tax Laws (Amendment) Act, 1989, w. e. f. 1st April, 1989, inter alia, for allowing deductions in respect of the earnings in convertible foreign exchange in respect of the business of a hotel or of a tour operator. In Sub-section (6) of the said section it has been provided that any deduction under the said section shall not be admissible unless the assessee furnishes, along with the return of income, the report of an accountant, as defined in the Explanation below Sub-section (2) of Section 288, certifying that the deduction has been correctly claimed. (c) The writ petitioner duly filed its returns of income in respect of the asst. yrs. 1989-90, 1990-91 and 1991-92 and in each of the said assessment years, the writ petitioner claimed in its returns deductions under Section 80hhd and, as required under the said Act, for each of the said assessment years, the writ petitioner filed certificates, in the prescribed forms, from the chartered accountant, inter alia, certifying that the deductions have been correctly claimed. The said certificates issued by Ray and Ray, Chartered Accountants, and duly signed by one of its partners have been annexed to the writ application. (d) The AO passed the orders of assessments in respect of the said three assessment years under Sub-section (3) of Section 143 of the said Act and allowed the petitioner deductions under Section 80hhd. (e) The Dy. CIT issued three notices, as referred to hereinabove, under Section 148 of the said Act alleging that there has been escapement of assessment within the meaning of Section 147 of the said Act. The petitioner made several correspondences with the IT Department asserting that the assessments in respect of those assessment years have been correctly made and there has been no omission or failure of any nature whatsoever on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for those assessment years. The writ petitioner also requested for supply of the reasons for the proposal for reassessment. (f) By a letter dt. 21st Aug. , 1997, the Dy. CIT directed the writ petitioner to file fresh returns in respect of those assessment years overruling the contentions of the writ petitioner that the returns originally filed in respect of those assessment years could not be accepted even with modifications as the returns in compliance of the notices under Section 148 of the said Act. In the said letter, the writ petitioner was informed that the reasons as contemplated under Section 151 of the said Act have been recorded before obtaining the approval from the CIT. (g) The writ petitioner, thereafter, filed fresh returns in respect of the said assessment years
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