TMI Blog1991 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... nicated the reasons by his letter dated March 27, 1987. Then the petitioner filed returns under protest and challenged the validity of the said notices by praying for a writ of certiorari to call for the records relating to the said notices and quash the same. The impugned notices under section 148 of the Income-tax Act for reopening the assessments for the assessment years 1980-81, 1981-82, 1982-83, 1983-84, 1984-85 and 1985-86 are questioned in Writ Petitions Nos. 5981 of 1987, 5944 of 1987, 5994 of 1987, 5870 of 1987, 5887 of 1987 and 5886 of 1987, respectively. The respondent filed a counter-affidavit and an additional counter-affidavit. It is stated that the petitioner's main source of income is commission from selling of chillies. It also carries on the business of purchasing and selling other agricultural produce. In the course of assessment proceedings for the year 1986-87, it is stated, it came to light that certain income chargeable to tax has escaped assessment, and therefore, notices under section 148 of the Income-tax Act were issued. The petitioner collected amounts under the head "sub sadaran" while effecting sales to the customers, during the previous year relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. It is further stated that the assessments for the assessment years 1981-82 and 1982-83 were completed under section 143(1) of the Income-tax Act, and in respect of the assessment years 1980-81, 1983-84, 1984-85 and 1985-86, the petitioner did not disclose the primary and material facts relating to the claim either in the return of income or in the course of the assessment proceedings, and, therefore, the assessing authority could not go into the justifiability of the claim and as such the notices issued under section 148 are legal. It is added that the notices under section 148 have been issued oil account of gathering of information subsequent to the assessment. For this reason also, the notices are valid. For the assessment years 1984-85 and 1985-86, apart from non-disclosure of particulars relating to "sub sadaran", the petitioner claimed deduction of market cess and sales tax without paying the amounts under those heads and, therefore, there has been violation of section 43B of the Act and, hence, for the said years notices issued under section 148 are legal and valid. Furnishing credit balances in "sub sadaran" account on the liabilities side of the balance-sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the impugned notices can be sustained under section 147(b) of the Act. Now the only question which remains to be considered is whether the impugned notices are valid under section 147(a) of the Act. It would be appropriate to read section 147(a) here: " 147. If (a) the Income-tax Officer has reason to believe that, by reason, of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or . . . he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where income chargeable to tax has been underassessed ; or (b) where such income has been assessed at too low a rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first was that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax had been underassessed, and the second was that he must have reason to believe that such underassessment had occurred by reason of either (a) omission or failure on the part of an assessee to make a return of his income under section 22 of the old Act (section 139 of the Act), or (b) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year. It was observed that both these conditions were conditions precedent to be satisfied before the Incometax Officer could have jurisdiction to issue a notice for the reassessment. While explaining the meaning of the words "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year" used in section 34, it was observed that the section postulated duty on every assessee to disclose fully and truly all material facts necessary for assessment by the Income-tax Officer. What facts were material and necessary for assessment differed from case to case. So far as the primary facts were concerned, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment and that production before the Income-tax Officer of the account books or other evidence from which material facts could, with due diligence, have been discovered by the Income-tax Officer, will not necessarily amount to disclosure contemplated by law. It was further observed that the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts and if an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment. In ITO v. Calcutta Chromotype Pvt. Ltd. [1974] 97 ITR 55, a Division Bench of the Calcutta High Court held that the balance-sheet filed along with the return forms part of the return itself in view of the provisions under the Income-tax Rules. It further held that mere change of opinion regarding the same facts does not confer jurisdiction to issue notice under section 148 of the Act. In Sirpur Paper Mills Ltd. v. ITO [1978] 114 ITR 404, a learned single ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine whether the conditions precedent for reopening the assessments under section 147(a) are satisfied. Regarding the first condition it must be shown that the assessing authority has reason to believe that income has escaped assessment. There must be some material before him providing basis for the belief that income has escaped assessment. Here the reason given is that in the year 1986-87, the amounts received by the assessee as "sub sadaran" were treated as trading receipts and taxed, which was upheld by the Appellate Assistant Commissioner. This is not disputed by Sri Ratnakar. But he submits that, in the subsequent years and even in the year 1989-90, collection of amount under the head "sub sadaran" was not taxed. True, as submitted by learned standing counsel, the assessments have not become final but what does it show ? In our view, it shows that regarding the nature of receipt as "sub sadaran", there has been change of view from time to time and this cannot furnish reason for the belief that income has escaped assessment. (ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) and Sirpur Paper Mills Ltd. v. ITO [1978] 114 ITR 404 (AP)). Regarding the second condition learned stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum was incurred by the assessee according to the method of accounting regularly employed by him. In so far as the deduction of market cess is concerned, as the same was not paid in the previous years relevant to the assessment years 1984-85 and 1985-86, and the same was not covered by section 43B at the relevant time, it cannot be said that the income escaped assessment due to deduction of the said market cess while computing the income. "Cess" was included in section 43B by the Finance Act, 1988, with effect from April 1, 1989. Therefore, this reason also is untenable for reopening the assessment for the assessment years 1984-85 and 1985-86. However, in so far as deduction of sales tax is concerned, that is covered by section 43B of the Act in the assessment year 1984-85. Therefore, unless the amount of sales tax was paid by the assessee in the previous year relevant to the assessment year 1984-85, he was not entitled to deduction. The petitioner also does not dispute that the amount of sales tax of Rs. 58,181 was not paid in the previous year relevant to the assessment year 1984-85. This reason justifies notice issued under section 148 of the Act for reopening the assessment fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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