TMI Blog2004 (8) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... : ALOKE CHAKRABARTI., SADHAN KUMAR GUPTA. JUDGMENT Sadhan Kumar Gupta J. - All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C.O.4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see [2002] 258 ITR 160), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant. The writ applications were instituted by the appellant challenging the notice issued under section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under section 148 of the Income-tax Act on grounds which are identical in nature. The said notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts: (a) Income from forfeiture of lapsed certificates. (b) Profit under section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.' (c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement. (d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis. (e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice. 4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in section 151 of the Act. The said section 151 of the Income-tax Act runs as follows: "In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner: Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice." So the proviso to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn". So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under section 139 of the Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also in Praful Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 (Guj) and also certified copy of a judgment passed by the Division Bench of this court in F.M.A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) and also Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC). From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above. We have already pointed out that the Assessing Officer has got enough 11 pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO [1998] 231 ITR 200 (SC). In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : "That, however, could not be a ground f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted above, this ground, i.e., the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979, which was one of the basis for issuance of the notice under section 148 of the Act, cannot stand. To our mind, it must be held, in the absence of any such material, that the Assessing Officer was not justified in issuing the notice under section 148 of the Act on the ground of alleged suppression of income by the appellant-company. On the basis of the Supreme Court's decision and the report of the Reserve Bank of India it cannot be said that the Assessing Officer had reason to believe that there was suppression of income by the assessee for the relevant assessment years. So, on those grounds, the Revenue has failed to prove that the Assessing Officer had reason to believe that there was suppression of material facts by the assessee for a particular year. The Assessing Officer also preferred to issue the notice for reopening the assessments on the basis of the auditor's observation in the annual reports of Peerless for the year 1986 (1987-88). It appears that on the basis of the said observation of the auditor, the Assessing Officer proposed to reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judge in this judgment also observed to the effect (page 165 of [2002] 258 ITR) : "There is no dispute that when the return was submitted, the profit and loss account as well as the balance-sheet had been furnished. There is also no dispute that at the time when the original assessments had been made, books of account of the petitioner, as had been called for, had been produced." So, he was also of the opinion that all the material facts were placed by the assessee-company at the time of assessment for the relevant years. Whether the procedure followed by the company is correct or not is a different issue. It is the admitted position that the Assessing Officer after being satisfied about those facts accepted the statement of the assessee-company. There is no new ground available to the Assessing Officer in order to form a reasonable belief that there was suppression of material facts by the assessee-company. Moreover if we look into the case reported in 159 ITR (SC) then it will appear that the hon'ble Supreme Court was of the opinion that on the basis of the auditor's report alone, it could not be said that the assessee had failed to disclose fully and truly all the basic facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judge. It appears that in his judgment the learned single judge was of the opinion that from the Supreme Court judgment or from the reports of the Reserve Bank of India which were not produced by the Revenue at the time of hearing, it could not be held that there was suppression of income during the relevant years under consideration. He simply preferred to rely upon the auditor's report, which according to him is sufficient for holding that there was prima facie reason for the Assessing Officer to hold that the appellant-company did not fully and truly disclose its income in respect of the assessment years in question, out we have pointed out in our discussion above, that there was nothing in the auditor's report to come to such a conclusion. The learned judge was of the opinion that from the discrepancy, as appeared in the auditor's report, it would be "anybody's guess" as to since when such discrepancies continued. But we have already held that there is no material which have a rational connection or a live link or a direct nexus with the formation of the requisite belief under section 147(a) of the Income-tax Act as laid down in the decision reported in Calcutta Discount Co. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer had sufficient reasons to issue the notice for the purpose of reopening the assessment for those three years. But we are unable to agree with this approach of the learned judge in coming to the conclusion that the Assessing Officer was justified in issuing the notice. The material on which the learned judge preferred to rely was not taken into consideration by the Assessing Officer while issuing the notice. This, in our opinion, is not permissible. If the notice is held to be valid on this ground, then that will certainly create a peculiar situation. Because in that event, the Assessing Officer will be compelled to reopen the assessment on the basis of the statement made in the writ petition, as suggested by the learned judge. At the same time it may be pointed out that the law does not allow the Assessing Officer to reopen the assessment on any other new ground which is not the basis of the issuance of the notice under section 148 of the Act. The finding of the learned judge, in this respect, appears to us to be not proper and as such it should be set aside. Therefore, from our above discussion, we are of the opinion that the Assessing Officer was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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