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2003 Supreme(Cal) 343
High Court of Calcutta
A.K. Ganguly, Debi Prasad Sengupta, JJ.
Income-Tax Officer – Appellant
Versus
Electro Steel Castings Ltd. – Respondent
F.M.A. 255 of 1993
Decided on : July 11, 2003
Ram Chandra Prasad, Debi Prasad Pal, Manisha Seal, Malay Dhar
The assessee is required to disclose all primary facts fully and truly in the course of the assessment proceedings, and this obligation is not discharged by mere production of the sole selling agency agreement.
Headnote:
INCOME TAX - Reopening of assessment - Section 147 - Validity of notices - Disclosure of material facts - Obligation of assessee - True and full disclosure - Requirement of explanation 2 to Section 147 - Ratio in Calcutta Discount Co. Ltd. v. ITO (1961) 42 ITR 196 (SC) - Applicability.
Fact of the Case:
The assessee, a public limited company, received six notices under Section 148 of the Income-tax Act, 1961, for the assessment years 1968-69 to 1973-74. The notices were issued on the ground that there was reason to believe that income chargeable to tax had escaped assessment within the meaning of Section 147 of the Act. The assessee filed a writ petition challenging the validity of the notices, contending that there was no material to justify the issuance of the notices and that the assessee had made full and true disclosure of all material facts in the course of the assessment proceedings.
Finding of the Court:
The High Court held that the notices issued under Section 148 of the Income-tax Act, 1961, were valid and that the assessee had not made full and true disclosure of all material facts in the course of the assessment proceedings. The court held that the assessee was required to disclose all primary facts fully and truly, and that this obligation was not discharged by mere production of the sole selling agency agreement. The court also held that the ratio in Calcutta Discount Co. Ltd. v. ITO (1961) 42 ITR 196 (SC) was not applicable to the facts of the case, as the assessee had not made full and true disclosure of all material facts.
Issues: 1. Whether the notices issued under Section 148 of the Income-tax Act, 1961, were valid? 2. Whether the assessee had made full and true disclosure of all material facts in the course of the assessment proceedings?
Ratio Decidendi: 1. The power to reopen assessment under Section 147 of the Income-tax Act, 1961, is wide in nature, but it is conditioned by certain jurisdictional facts. 2. The existence of the belief that income has escaped assessment may be justiciable, but not its adequacy. 3. The belief must be bona fide and have a reasonable nexus with the issues involved in the assessment, it cannot be a mere pretence or a ruse. 4. The assessee is required to disclose all primary facts fully and truly, and this obligation is not discharged by mere production of the sole selling agency agreement. 5. The ratio in Calcutta Discount Co. Ltd. v. ITO (1961) 42 ITR 196 (SC) is not applicable to cases where the assessee has not made full and true disclosure of all material facts.
Final Decision: The appeal was allowed, the judgment of the learned single judge was set aside, and the writ petition was dismissed. The notices issued for reopening of the assessments were upheld.
Asok Kumar Ganguly, J.
1. THIS appeal is directed against the judgment and order dated May 16, 1989, passed by a learned judge of this court in Civil Rule No. 3074(W) of 1977. By the said judgment and order, the learned judge allowed the writ petition and quashed the notices issued under Section 148 of the Income-tax Act, 1961. While passing the judgment under appeal, the learned judge noted that the said rule was made ready in the year 1979 and the matter was directed to appear in the list on different dates for hearing. Directions were given for affidavits, but, as no affidavit was filed by the Revenue, time to file the said affidavit was further extended on January 11, 1988. But, even then also, no affidavit was filed. Nor were the records produced which are normally produced in a proceeding relating to Section 148 notices. Since no materials were produced justifying the issuance of the notices, the learned judge found that the case in the writ petition that the notices were issued without any materials and without formation of opinion could not be controverted and, as such, the writ petition was allowed and the notices were quashed.
2. THIS appeal was taken up for hearing before this court on November 12, 2002, but, at that time, nobody appeared for the appellant. THIS court considering the order of the learned trial judge and the non-appearance of the appellant at the time when the appeal was taken up, dismissed the appeal. But, before the order could be signed by this Bench, learned counsel for the appellant mentioned for recalling the order and explained the circumstances for which he could not appear. Considering those facts the order was recalled and, thereafter, the matter was fixed for hearing afresh. Learned counsel for the Revenue also prayed for an opportunity to file affidavit in connection with the writ petition. Pursuant to such prayer, liberty was given to file the affidavit and also to produce the records by the court's order dated January 25, 2003. The matter was fixed for hearing on March 20, 2003. Thereafter, affidavits were filed, records were produced and the matter was heard before us on March 20, 2003, and also thereafter. After the affidavits were filed, we could have remanded the matter to the learned trial judge for deciding the controversy afresh. But, since a long period of time has elapsed and both the parties prayed for a decision of the matter on the merits by the appeal court, we do so by this judgment.
3. THE facts on the basis of which the writ petition was filed are summarised as follows : On or about April 1, 1977, the respondent received six notices all dated March 19, 1977, and those notices were issued by the appellant under Section 148 of the Income-tax Act (hereinafter referred to as the "Act"). Those notices were in respect of the assessment years 1968-69, 1969-70, 1970-71, 1971-72, 1972-73 and 1973-74. By those notices the appellant alleged that there is reason to believe that income chargeable to tax from the respondent for the said assessment years escaped assessment within the meaning of Section 147 of the Act and as such it was proposed to reopen the assessment and reassess the income of the respondent for which the respondent was called upon to file return within 30 days from the date of receipt of the notices. It appears from the said notices relating to the assessment years 1968-69, 1969-70, 1970-71, 1971-72 that they were issued after obtaining the satisfaction of the Commissioner of Income-tax, Orissa, Bhubaneswar, and those said notices were sent by registered post with acknowledgement due at the head office of the respondent at 4, Dalhousie Square East, Calcutta.
4. THE respondent is a company registered as a public limited company under the Indian Companies Act, and the business of the respondent-company consists of manufacturing of steel castings, grinding media and spun pipes and its sale. For the purpose of carrying on the said manufacturing activities, the re
