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High Court Of Allahabad
M.C.Agarwal, S.Rafat Alam, JJ.
S.K. Gupta And Co.
Vs.
Income-Tax Officer And Anr.
Civil Miscellaneous Writ Petition 284 of 1998
Decided on: Nov 22, 1999
INCOME TAX - REASSESSMENT - NOTICE - VALIDITY - LIMITATION - EXPLANATION 2(B) TO SECTION 147 - APPLICABILITY - INCOME ESCAPED ASSESSMENT - REASON TO BELIEVE - RECORDING OF REASONS - NECESSITY - DIRECTION BY COMMISSIONER - MEANING AND EFFECT.
Fact of the Case:
The petitioner challenged a notice issued under Section 148 of the Income-tax Act, 1961, for the assessment year 1987-88, on the grounds that a previous notice issued under the same section had not been quashed, that the impugned notice was issued to circumvent the limitation period, and that no subsequent notice could be issued on the same facts and grounds for the same assessment year.
Finding of the Court:
The court held that the petitioner could not raise the contention that the Assessing Officer did not have the requisite reason to believe that income had escaped assessment, as this contention was not raised in the writ petition and there was no evidence to support it. The court also held that the impugned notice was validly issued under Explanation 2(b) to Section 147, as the assessee had understated the income in the return filed in pursuance of the earlier notice under Section 148 and the income declared in the said return was less than the additional income offered by the assessee during the course of search and seizure operations.
Issues: 1. Whether the petitioner could raise the contention that the Assessing Officer did not have the requisite reason to believe that income had escaped assessment, even though this contention was not raised in the writ petition and there was no evidence to support it? 2. Whether the impugned notice was validly issued under Explanation 2(b) to Section 147, as the assessee had understated the income in the return filed in pursuance of the earlier notice under Section 148 and the income declared in the said return was less than the additional income offered by the assessee during the course of search and seizure operations?
Ratio Decidendi: 1. The court held that the petitioner could not raise the contention that the Assessing Officer did not have the requisite reason to believe that income had escaped assessment, as this contention was not raised in the writ petition and there was no evidence to support it. The court relied on the settled legal position that the Assessing Officer must have his own reasons to believe that income chargeable to tax has escaped assessment, and that the opinion rendered by an audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. 2. The court held that the impugned notice was validly issued under Explanation 2(b) to Section 147, as the assessee had understated the income in the return filed in pursuance of the earlier notice under Section 148 and the income declared in the said return was less than the additional income offered by the assessee during the course of search and seizure operations. The court noted that all the conditions mentioned in Clause (b) of Explanation 2 were satisfied in this case, and that the Assessing Officer could reassess the income after issuing a notice under Section 148.
Final Decision: The court dismissed the writ petition with costs to the respondents.
M.C. Agarwal, J.
1. BY this petition under Article 226 of the Constitution of India, the petitioner challenges a notice dated March 26, 1998, issued under Section 148 of the Income-tax Act, 1961, for the assessment year 1987-88; a copy of which is annexure 5 to the writ petition.
2. WE have heard Sri V.B. Upadhya, senior advocate assisted by Sri A. Upadhya, advocate, learned counsel for the petitioner, and Sri Bharat Ji Agarwal, senior advocate, for the respondents.
The proceedings relate to the assessment year 1987-88 for which a return of income was filed and an assessment was made under Section 143(1) of the Income-tax Act. Thereafter, on October 5, 1990, the Assessing Officer issued a notice under Section 148 which was received by the asses-see on October 10, 1990. In compliance with the said notice a return of income was filed on November 16, 1990. The petitioner claimed the status of a registered firm. On March 27, 1991, the assessment was completed in the status of an association of persons (AOP). On April 22, 1991, the Assessing Officer, i.e., respondent No. 1, passed an order under Section 154 of the Act stating that there had been a mistake in mentioning the status of the assessee in the assessment order and that in place of association of persons (AOP), URF (unregistered firm), be read throughout the assessment order. The assessee appealed and the Commissioner of Income-tax (Appeals) who allowed the appeal on the ground that an assessment on an association of persons could not be made without issuing a notice to the associations of persons. He, therefore, set aside the assessment directing that the assessment be made again, in accordance with law. Thereafter cross appeals were filed before the Tribunal by the Department as well as by the assessee, against the order passed by the Commissioner of Income-tax (Appeals). The Tribunal dismissed the Revenue's appeal and allowed the appeal by the assessee and quashed the assessment on the ground that in the circumstances of the case, no assessment could be made on the association of persons.
3. DURING the time taken in the aforesaid proceedings, the assessment proceedings that had commenced on the basis of the notice dated October 5, 1990, under Section 148 of the Act became barred by time. Consequently, the Assessing Officer issued a fresh notice under Section 148 on March 26, 1998, and it is this notice which is under challenge in the present writ petition and the grounds of challenge have been mentioned in paragraph 26 of the writ petition which is as under :
"(A) Because, the original notice under Section 148 having not been quashed and a return in pursuance of that notice having been filed, the Department has no jurisdiction to issue subsequent notice dated March 26, 1998, on the same facts for the same assessment year, i.e., 1987-88, during the pendency of the earlier proceedings.
(B) Because, the notice having been issued with a view to circumvent the period of limitation, is, therefore, illegal, arbitrary and without jurisdiction.
(C) Because, no subsequent notice can be issued on the same facts and on the same ground for the same assessment year, i.e. 1987-88."
4. THE respondents have filed a counter affidavit which is sworn by one Shiv Ram Singh Chahal in which it is stated that a search was conducted at the business premises of the assessee as well as the residential premises of the partners and some incriminating material was found and seized. THE history of the case, as stated above, is admitted and it is stated that an application under Section 256(1) has been filed against the aforesaid order of the Tribunal. It is stated that the Commissioner of Income-tax directed that the assessment for the year under consideration may be reopened under Section 147 and in compliance of the directions of the Commissioner, the case was reopened with the approval of the Commissioner of Income-tax and the impugned notice under Section 148 was issued and was duly served.
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