1998 Supreme(Guj) 77

Gujarat High Court
Judgename :KUNDAN SINGH, R.K.Abichandani
Praful Chunilal Patel - Appellant
Versus
M.J.Makwana or His Successor Assistant Commissioner of Income Tax - Respondent
S.C.A. 4201 of 1996
Decided On : 02/19/1998

Headnote:Income Tax Act, 1961 - Sec. 147 - Words assess & reassessment, escaped assessment and reason - Connotation of - Unless matter never enquired initiation of proceedings cannot be challenged and writ cannot be issued under Art. 226.The word `assess refers to a situation where the assessment was not made in the normal manner while the word `re-assess refers to a situation where an assessment is already made, but it is sought to be re-assessed on the basis of this provision.[Para 9]The words escaped assessment where the return is filed, are apt to cover the case of a discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non-consideration, or, caused by a mistake of law applicable to such transfer or transaction even where there has been a complete disclosure of all relevant facts upon which a correct assessment could have been based.[Para 11]The word reason in the phrase `reason to believe would mean cause of justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words reason to believe, cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and if he likes from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason to believe that such income had escaped assessment. The justification of his belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under Sec. 147, may ultimately stand altered after the hearing and while reaching the final conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter. In the present case, from the first assessment it appeared to the Assessing Officer, while making an order in respect of the Assessment Year 1993-94, that the amount of taxable income in form of capital gains in respect of the transfer of the land which was treated as stock-in-trade on 19.9.1990 in favour of the firm and the tax payable thereon not being ascertained, there was escapement of income. Since the Assessing Officer at the first assessment in the year 1991-92 never really formed an opinion on the question whether there was a transfer on 19.9.1990 of the land in question to the firm and that the amounts credited to the accounts of the Partners who had contributed the lands to the firm, were meant to be the price of the land which was to be actually paid from the collections received by the firm from membership fees as soon as received, as was envisaged admittedly in paragraph 11 of the Partnership deed, there was no question of any change of opinion when on the relevant facts being found the Assessing Officer while protectively assessing the petitioner assessee for the year 1993-94, noted that this was a case for issuance of a notice under Sec. 148, which came to be issued thereafter. When the amount of taxable income and of the tax payable thereon were not ascertained at all by the Assessing Officer in respect of the transfer made by the assessee in favour of the firm on 19.9.1990, there obviously was no opinion formed in that regard and consequently, there would not arise any question of a mere change of opinion. In cases where the Assessing Officer had over-looked something at the first assessment, there can, in our opinion, be no question of any change of opinion when the income which was chargeable to tax is actually taxed as it ought to have been under the law but was not, due to an error committed at the first assessment.[Para 12]Unless it is shown that the Assessing Officer never enquired into the matter at all or that he never honestly believed that a mistake has been made, the result of his investigation and initiation of the proceedings under Sec. 147 of the Act cannot be challenged on the ground of want of jurisdiction. The Assessing Officer has to determine the facts and the law in order to give him jurisdiction to proceed and if in the determination of this he goes wrong, the proper remedy for the assessee would be to go up in appeal and to have the case referred to the High Court under the provisions of the Act. A writ of prohibition under Art. 226 cannot be issued against the Assessing Officer in such cases.Special Civil Application Nos. 4201 & 4203 of 1996[Para 13