TMI Blog2006 (12) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... king up ITA No. 429(Coch.)/2005 and the issue of validity of reassessment proceedings by issuing notice under section 148 of the Act. In the assessment year 1996-97, the assessee has challenged the validity of the notice under section 148 by taking up the following contentions : ( i )The original assessment for assessment year 1996-97 was completed under section 143(3) and notice issued under section 148 was beyond the four years period from the end of the assessment year, by virtue of the proviso to section 147, the said notice is time-barred. ( ii )There was no material before the Assessing Officer to form the belief for initiating proceedings under section 147 of the Act. ( iii )The sanction accorded by the Commissioner of Income-tax under section 151(1) of the Act is without application of mind. 4. The learned Chartered Accountant Shri K.I. John submitted that the assessee is a partner in Hotel Mayura and he is also assessed in the capacity of individual. It was submitted that for the assessment years 1996-97 to 2000-01 proceedings under section 147 were initiated. As far as assessment year 1996-97 is concerned, original assessment was completed under section 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be quashed. The ld. CA relied on the following precedents in support of his contentions : ( i ) Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) ( ii ) Jagdish Prasad Gupta v. CIT 195 CTR (Delhi) 292 ( sic ) ( iii ) K.S. Suresh v. Dy. CIT [2005] 279 ITR 61 (Mad.) ( iv ) CIT v. Foramer France [2003] 129 Taxman 72 (SC) ( v ) Arjun Singh v. Asstt. DIT (Inv.) [2000] 246 ITR 363 (MP) ( vi ) United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 317 (Delhi) ( vii ) Mohinder Singh Malik v. Chief CIT [2004] 267 ITR 716 (Punj. Har.) ( viii ) Nitin P. Shah alias Modi v. Dy CIT [2005] 146 Taxman 536 (Guj.) ( ix ) Asstt. CIT v. Star Fero Alloys (P.) Ltd. [2004] 90 ITD 63 (Delhi)(TM) ( x ) Travancore Cements Ltd. v. Asstt. CIT [2006] 4 KLT 344 (Ker.). 5. Per contra , Smt. A. S. Bindhu, the ld. DR submitted that following the tax evasion petition against the assessee and the investigation made by the ADI, the Assessing Officer received the report from the investigation wing and the Assessing Officer proceeded to initiate action under section 147. It was further argued that as per the investigation report, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red Accountant has filed the Xerox copy of the order sheet of the Assessing Officer for the assessment year 1996-97. The assessee has also filed paper book. The fundamental issue is regarding the assumption of jurisdiction for issuing notice under section 148. In this case, the original assessment of the assessee was completed under section 143(3). Subsequently, some anonymous evasion petition was received and some investigation was done by the investigation wing of the Income-tax Department. During the course of investigation it was revealed that the assessee has suppressed the investment in respect of construction of his palatial residential building which was about 6000 sq. ft. in the year 1995. It was further revealed that the assessee has purchased 165 acres of land at Theni investing Rs. 50 lakhs. It was also found that the assessee was maintaining the benami account with Federal Bank with account No. 3075 in which huge credits were found. On the basis of the said investigation, it appears that a report was forwarded to the Assessing Officer and on the basis of said report the Assessing Officer proceeded to initiate action under section 147. In the backdrop of these facts, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded. As far as the first reason in respect of the construction of residential house, we find that while completing the assessment under section 143(3), the assessee has disclosed the investment in the residential house. The second reason is in respect of the alleged acquiring of 167 acres of land at Theni, but the Assessing Officer has not categorically given anything that the said investment was made in the previous year relevant to the assessment year 1996-97 or in other words when the said investment was made and what is the documentary proof for acquiring the said alleged land. In respect of the third reason, It appears that the statement of one Shri Francis George was recorded and who stated that the bank account No. 3075 in the Federal Bank at Kalluppara was a benami one and it was operated by the assessee. On these three reasons, the Assessing Officer has recorded that he was satisfied that the has reason to believe that there is escapement of income. 9. In the case of Phool Chand Bajrang Lal ( supra ), the Hon ble Supreme Court has categorically made it clear that the Assessing Officer acquires the jurisdiction to reopen an assessment in which on the basis of specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vague reasons. Section 147 is not contemplated for making the roving and fishing enquiry in the hope of searching the escaped income. Moreover, from the assessment order, we find that though the Assessing Officer has given the reasons in respect of the investment in the residential house and acquiring the land of 165 acres but no income is assessed under section 69 of the Income-tax Act which empowers the Assessing Officer to make the assessment in respect of the unexplained investment. The addition made by the Assessing Officer is in respect of the credit entries in the capital account of M/s. Hotel Mayoora in which the assessee is a partner, unexplained loan from Shri George Joseph and cash deposit in S. B. Account No. 3075. In our considered opinion, the reasons given by the Assessing Officer for the initiation of the proceedings under section 147 cannot be stated to be based on any definite and conclusive information and material. The Assessing Officer has taken the shelter of section 147 for making roving and fishing enquiry for framing the assessment. We, therefore, hold that there was no definite material before the Assessing Officer for formation of belief and hence, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said V.K. Jain, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. As highlighted above, the Legislature has provided certain safeguards to prevent arbitrary exercise of powers by an Assessing Officer, particularly after a lapse of substantial time from completion of assessment. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval." In our opinion, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuing notice under section 148. We, therefore, hold that the proceedings initiated under section 147 in respect of assessment year 1997-98 by the Assessing Officer are without proper jurisdiction. 16. Now, we deal with another contention of the assessee relating to assessment year 1997-98 in respect of the sanction under section 151. In this case also, the sanction under section 151 was required and that is not disputed. It appears that the Assessing Officer sent proposal to the Addl. CIT, Kottayam as admittedly there was no assessment under section 143(3), under section 151(2) of the Act on 5-2-2003 seeking the sanction for initiation of proceedings under section 147. The Addl. CIT, Kottayam permitted the Assessing Officer to proceed under section 147 against the assessee by stating on the said proposal as under : "Yes, I am satisfied that this is fit case for reopening the assessment." The assessee has filed copy of the proposal sent by the Assessing Officer as well as the sanction accorded by the Addl. CIT which is placed at page 53 of the paper book. We have carefully examined the copy of the proposal on which sanction is accorded by the Addl. CIT. In this case, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r communicated the reasons to the assessee on 12-1-2004. The assessee filed his objections to the Assessing Officer regarding reopening vide his letter dated 5-2-2004. The Assessing Officer gave the reply to the letter of the assessee on 27-2-2004 justifying his reasons for initiation of the proceedings. After getting the reply from the Assessing Officer to his objections the assessee filed the second set of objections on 8-3-2004 in respect of all the assessment years. The Assessing Officer also gave reply to the assessee and finally the assessment was completed on 26-3-2004. The grievance of the assessee is that when the objections were pending before the Assessing Officer, the Assessing Officer issued notice under section 143(2) of the Act. We have carefully considered the principles laid down in the case of GKN Driveshaft (India) Ltd. ( supra ). In our opinion, the said decision is not helpful to the assessee. It is an admitted fact in this case that before the final assessment orders were passed for all these assessment years, the Assessing Officer has disposed of the objections filed by the assessee. We find no substance in the contention of the assessee. We, therefore, r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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