TMI Blog2004 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution of India, Arun Kumar Maheshwari, petitioner in Civil Misc. Writ Petition No. 538 of 2001; Amit Kumar Maheshwari, petitioner in Civil Misc. Writ Petition No. 539 of 2001 and Ajay Kumar Maheshwari, petitioner in Civil Misc. Writ Petition No. 540 of 2001 seek a writ, order or direction in the nature of certiorari quashing the notice dated 15-3-2001 issued by the Income-tax Officer, Ward Bijnor, relating to the assessment year 1995-96. Civil Misc. Writ Petition No. 709 of 2001 has been filed by six persons, namely, Lalit Kumar Agrawal, Raj Kamal Agrawal, Atul Kumar Agrawal who are brothers, and their wives seeking a writ, order or direction in the nature of certiorari quashing separate notices issued to them on 15-3-2001 by the Income-tax Officer, Ward Bijnor, respondent No.1, under section 148 of the Income-tax Act, 1961 ("the Act"), relating to the assessment year 1996-97. Since all the four petitions raise a common question of law, they are being decided together by a common judgment and order. Briefly stated, the facts giving rise to Civil Misc. Writ Petition Nos. 539 to 540 of 2001 are as follows:- 2. Arun Kumar Maheshwari and Ajay Kumar Maheshwari are brothers wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been furnished under the Wealth Tax proceedings and the Wealth-tax Officer after making proper and necessary enquiry, had accepted the gift. The Income-tax Officer, Ward Bijnor had issued notices dated 15-3-2001 under section 148 of the Act seeking reopening of the assessment, which notices are under challenge in the present writ petitions. 7. The facts in Civil Misc. Writ Petition No. 709 of 2001 are as follows:- The three brothers, namely, Lalit Kumar Agrawal, Raj Kamal Agrawal and Atul Kumar Agrawal, are assessed to tax in the status of Hindu Undivided Family whereas their wives, namely, Smt. Radha Agrawal, Smt. Rachna Agrawal and Smt. Niti Agrawal are assessed in their individual capacity f or the assessment year 1996-97. Each of the petitioners filed Wealth Tax return with the Income-tax Officer, Ward Bijnor on 19-7-1996 declaring the following wealth:- Lalit Kumar Agrawal Rs. 5,92,000 Raj Kamal Agrawal Rs. 4,95,500 Atul Kumar Agrawal Rs. 4,97,000 Smt. Radha Agrawal Rs. 4,56,000 Smt. Rachna Agrawal Rs. 7,04,500 Smt. Niti Agrawal Rs. 7,04,500 They had also disclosed the amount of gift which they had received during the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings, have been disclosed by the petitioners in their wealth tax return and the Wealth-tax Officer, Ward Bijnor who is the Assessing Authority, had examined the gifts in detail and after making necessary enquiry and after having been satisfied about the genuineness of the gift, had accepted the same while making assessment under the Wealth-tax Act. He, thus, submitted that the Income-tax Officer and the Wealth-tax Officer being the same person, it would be presumed that the gifts in question have been duly explained and accepted by the Department and, therefore, no income has escaped assessment. The proceedings under section 147/148 of the Act are, therefore, bad and without jurisdiction. According to him, the Assessing Authority had full knowledge of the gifts received by the petitioners and if he had any doubt, the assessment under the Income-tax Act would not have been made. According to him, assessment under section 143(1)(a) of the Act is an assessment for all purposes and, therefore, the re-assessment proceedings are not permissible under law. He further submitted that there was no material which could lead the Income-tax Officer to have reasons to believe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002] 257 ITR 512 (Ori.); (ii) Great Arts (P.) Ltd. v. ITO [2002] 257 ITR 639 (Delhi); and (iii) Citibank N.A. v. S.K. Ojha [2002] 257 ITR 663 (Bom.). 13. Having heard the learned counsel for the parties, we find that in the present case the notice under section 148 of the Act and the reasons which have been recorded for initiating proceedings for reassessment has been challenged on the ground that from the material on record the Income-tax Officer could not have formed any belief that any part of the income has escaped assessment to tax which is the prerequisite condition for assuming the jurisdiction of the Assessing Authority to initiate proceedings under section 147/148 of the Act. 14. Under section 147 of the Act the proceedings for the assessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The question whether the Assessing Officer had reasons to believe is not a question of limitation only but is a question of jurisdiction, a vital thing, which can always be investigated by the Court in an application under Article 226 of the Constitution as held in Daulat Ram R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer and the formation of his belief that there has been escapement of income of the assessee from assessment in the particular year. It is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of income of the assessee from assessment, as held by the Hon'ble Supreme Court in the case of Lakhmani Mewal Das. If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Assessing Officer could not have reason to belief. In such a case, the notice issued by him would be liable to be struck down as invalid as held in the case of Ganga Saran Sons (P.) Ltd. 18. In the case of GKN Drives hafts (India) Ltd. the Apex Court has held as follows: "When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the notice is to file the return and, if he so desires, to seek reasons for issuing the notices. The Assessing Officer is bound to furnish reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any of the fundamental rights; where there is failure of principle of natural justice or where the orders of proceedings are wholly without jurisdiction or the vires of an Act is challenged. 21. As held by the Apex Court in the case of Calcutta Discount Co. Ltd., this Court under Article 226 is entitled to go into the relevancy of the reasons as also to scrutinize as to whether there was reasonable belief or not. 22. In the case of Comunidado of Chicalim v. ITO [2001] 247 ITR 271 (SC), the Apex Court had held that when an assessee challenges a notice to reopen an assessment under section 147 of the Act on the ground that no reasons under section 148 had been recorded or disclosed, the Court must call for and examine the reason, and, in fact, ordinarily, the reasons are set out by the respondents to the writ petitioner in their counter. 23. In the case of Foramer v. CIT [2001] 247 ITR 436 (All.), this Court has held that notice under section 147 should not be given on mere change of opinion and if notice under section 148 was without jurisdiction the petitioner should not be relegated to the alternative remedy and the writ petition was maintainable, which has been upheld by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussions, we are of the considered opinion that the writ petition under Article 226 is maintainable. 27. It is well-settled that the proceedings under the Wealth-tax Act and the Income-tax Act are separate and merely because the Assessing Officer under the Wealth-tax Act and the Income-tax Act is one and the same person, would not mean that the scrutiny of materials/informations/wealth under the Wealth-tax Act would debar the Assessing Authority from taking appropriate steps under the Income-tax Act. It may be mentioned here that under the Wealth-tax Act an assessee is required to disclose his wealth only. How that wealth has been formed, is not to be gone into and, therefore, the question of disclosing the gifts in the return of wealth tax and its scrutiny in the assessment under the Wealth-tax Act, is of no consequence. It may be mentioned here that, according to the own showing of the petitioners, the return filed under the Act had been processed under section 143(1)(a) of the Act. 28. Under section 143(1)(a) of the Act the Assessing Officer makes an assessment of the total income or loss of the assessee after making such adjustment to the income or loss declared in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer was aware of the correct position, there would have been no difficulty in including them in the assessment for the year 1943-44. In that case the Income-tax Officer had brought to tax these cash credits in the assessment B year 1944-45 and the Income-tax Appellate Tribunal had held that it was to be included if at all in the assessment year 1943-44. This Court has held that it is true that the assessee did not disclose to the Income-tax Officer that the two cash credits represented income from undisclosed source but that is not material. In spite of the efforts of the assessee to conceal the true nature and source of the cash credits the Income-tax Officer had become aware of the true facts on February 22,1947. Once the primary facts were before him it was for him to draw a proper inference both of facts and law and to apply appropriate legal provisions. 31. In the case of Madnani Engineering Works Ltd. the Apex Court has held that the respondent had produced all the hundis on the strength of which it had obtained loans from creditors as also entries in the books of account showing payment of interest and it was for the Income-tax Officer to investigate and determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has held as follows:- "Under the extraordinary writ jurisdiction, interference is called for only in the event of there being any jurisdictional infirmity which goes to the root of the matter and not otherwise. At the stage of considering the validity of a notice of reassessment, the question is not whether what is stated in the information or the conclusion drawn, is true or not. The only question at this stage is about the relevancy of the material for formation of the requisite belief." 36. In the case of Citibank N.A., the Bombay High Court has held that mere production of evidence before the Income-tax Officer is not enough. There may be omission or failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the Assessing Authority. If there are some primary facts from which a reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the Income-tax Officer has jurisdiction to reopen the assessment. 37. Applying the principles laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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