TMI Blog2006 (6) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... s and has arrived at the reasons for his belief - - - - - Dated:- 19-6-2006 - Judge(s) : K. S. RADHAKRISHNAN., V. RAMKUMAR. JUDGMENT The judgment of the court was delivered by V. Ramkumar J.-In this appeal filed under section 260A of the Income-tax Act, 1961, (hereinafter referred to as "the Act"), the Revenue assails the order dated July 27, 2005, of the Income-tax Appellate Tribunal, Cochin Bench, in I.T.A. No. 117/Coch of 2005. As per the impugned order the Income-tax Appellate Tribunal partly allowed the respondent/assessee's appeal holding that the notice issued by the Assessing Officer to the assessee under section 148 of the Act is void ab initio and consequently set aside the reassessment proceedings initiated against the assessee under section 147 of the Act. The substantial questions of law formulated in the memorandum of appeal are the following: "(i) Whether, on the facts and in the circumstances of the case and the satisfaction contemplated under the statute being prior to and for the issue of notice under section 148 of the Income-tax Act and the same (satisfaction having been found by the Commissioner of Income-tax (Appeals)) on the perusal of the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to form the requisite opinion on being satisfied about the existence of reasons for his belief that income has escaped assessment, his independent judgment cannot be allowed to be influenced at the instance of his official superior. In other words, in a case, as the present, where the original authority does something acting under the dictation of his superior, his action will be tainted with illegality thereby rendering the proceedings null and void. But for the direction of the Commissioner of Income-tax in annexure F letter dated May 30, 2003, the Deputy Commissioner would not have issued the notice under section 148 of the Act. Hence, the consequential action for reassessment of income initiated by the Deputy Commissioner of Income-tax is vitiated. Reassessment proceedings initiated by the assessing authority without himself forming the requisite belief under section 147 of the Act, but instead, reopening the assessment on the directions of his superior, are liable to be quashed, (vide Chunnilal Onkarmal P. Ltd. v. ITO [1983] 139 ITR 380 (MP); Sheo Narain Jaiswal v. ITO [1989] 176 ITR 352 (Patna)). The Assessing Officer had initially completed the assessment on the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax authorities returned the gold to the magistrate's court in obedience to the direction of his court. Even though the Income-tax Department moved the magistrate for the custody of the gold biscuits alleging that the same were acquired by the assessee out of undisclosed income, their request was disallowed by the magistrate. Thereupon the Department moved the Sessions Court, Thiruvananthapuram. The sessions court ordered to hand over the gold to the Income-tax Department. In the meantime, noticing that the Sessions Court, Thiruvananthapuram, had ordered return of the gold biscuits seized from the assessee to the Income-tax Department and that, thereafter the Department had taken possession of the same on May 7, 2003, and had deposited the gold biscuits with the Reserve Bank of India, Thiruvananthapuram, for safe custody, the Commissioner of Income-tax, Kozhikode, as per annexure F letter dated May 30, 2003, directed the Deputy Commissioner of Income-tax, Circle-2(1), Kozhikode, to initiate income-tax proceedings by issuing notice under section 148 of the Act after recording his reasons for the same. The text of the letter reads as follows: "Copies of the judgment of the Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee before the Commissioner of Income-tax (Appeals)-I, Calicut, was unsuccessful as evidenced by annexure B order dated August 23, 2004. Thereupon the assessee filed an appeal as I.T.A. No. 117/Coch/05 before the Income-tax Appellate Tribunal, Cochin Bench, which as per annexure C order dated July 27, 2005, allowed the appeal in part and set aside the reassessment proceedings initiated under section 147 of the Act, for the reasons that the notice under section 148 of the Act issued by the Assessing Officer acting under the dictation of his superior and without applying his mind was void ab inirio. The legal issues We will first dispose of a contention urged on behalf of the assessee that grounds Nos. 2, 4 and 5 raised before the Tribunal were also pressed by the assessee and the statement to the contrary contained in annexure C order of the Tribunal is wrong. The Tribunal has unequivocally observed in paragraph 1 of its order that out of the five grounds raised by the assessee, counsel appearing for the assessee submitted that he was pressing only grounds Nos. 1 and 3. The Tribunal accordingly dismissed as not pressed grounds Nos. 2, 4 and 5. It is pertinent to note that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his superior. No doubt the Commissioner has directed the assessing authority to initiate income-tax proceedings. But the further direction was to issue notice under section 148 after recording his reasons for the same. There is still another direction that the Assessing Officer should comply with all the requirements of law while initiating action. The reassessment proceedings initiated by the Deputy Commissioner was after applying his mind to all the relevant materials and also after recording the grounds of his belief as already extracted herein-above. It is not even remotely discernible from annexure E that the Deputy Commissioner was mechanically obeying the directions of his official superior. There is not even a reference to annexure F letter. Even if there is advertence in the reassessment proceedings to the direction of the superior officer, that by itself will not vitiate the resultant proceedings as long as the Assessing Officer has independently applied his mind to all the relevant aspects and has arrived at the reasons for his belief. On the facts and circumstances of the case, we have no hesitation to conclude that annexure F letter has only alerted the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by counsel for the assessee are unique. When under the law the requisite belief under section 147 of the Act must be that of the Assessing Officer, the Income-tax Officer in that case, instead of forming his own belief, was merely acting at the behest of his superior authority. In fact, the Income-tax Officer was holding the view against the taxability of the assessee in that case. Likewise, in Chunnilal Onkarmal P. Ltd. v. ITO [1983] 139 ITR 380 (MP) cited on behalf of the assessee it was found that there had been no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Moreover, the Commissioner of Income-tax had by a letter directed the Income-tax Officer that "immediate action should be taken under section 147" thereby leaving no discretion to the Assessing Officer who without the basis of his own independent satisfaction, was mechanically obeying the directions of his superior. But that is not the factual position in the case on hand. After an anxious consideration of all the aspects of the case, we are of the view that the Tribunal misdirected itself on the matter which came up for its consideration. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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