TMI Blog2004 (8) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... , order or direction in the nature of certiorari calling for the record of assessment of M/s. Indra Prastha Chemicals (P) Ltd., petitioner No. 1, for the assessment years 1993-94 and 1994-95 and quashing the entire proceedings including the notices under section 148 of the Income-tax Act, 1961, hereinafter referred to as "the Act", and other consequential reliefs. Briefly stated, the facts giving rise to the present petition are as follows: Petitioner No. 1 is a private limited company incorporated under the provisions of the Companies Act, 1956. It was incorporated in the year 1989. Its registered office is situated at Isha Nagli, Mawana Road, Meerut. Petitioner No. 1 had established its factory for the manufacture of ethyl acetate, a chemical used in the manufacture of paints, etc., during the financial year 1993-94. It commenced production on January 16, 1995. Petitioners Nos. 2 and 3 became directors of petitioner No. 1 during the assessment year 1993-94. However, they resigned from the directorship of petitioner No. 1 on March 25, 1996, the fact which was recorded by the Registrar of Companies, in March, 1996, itself. Petitioner No. 1 had received share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,1999, has been filed as annexure 5 to the writ petition. The order dated November 21, 2003, passed by the Commissioner of Income-tax, Meerut, is under challenge in the present writ petition on the ground that he had not decided the plea of the petitioner that notice issued under section 148 of the Act had not been served upon petitioner No. 1. Certain additional grounds have also been raised in the present writ petition regarding jurisdiction assumed by the Assistant Commissioner of Income-tax, Circle 1, Meerut, respondent No. 2, for taking proceedings under section 147 of the Act. The main ground of challenge is that the Assistant Commissioner had not recorded any reasons for initiating the proceedings under section 147 and issuance of the notices under section 148 of the Act. Moreover, the reasons given in the report of the income-tax Inspector did not constitute relevant material for initiating the proceedings under section 147 and issuance of notices under section 148 of the Act. We have heard Sri S.P. Gupta, learned senior counsel assisted by Sri S.D. Singh on behalf of the petitioners, and Sri Ashok Kumar, learned standing counsel appearing for the respondents. Sri S.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19. He further submitted that this court cannot consider the sufficiency of material which led to the reopening of the assessment. He relied upon a decision of the apex court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34. Having heard learned counsel for the parties, we find that for the assessment years 1993-94 and 1994-95, notices under section 148 had been issued on April 26,1999, i.e., well within the period of limitation provided under section 149 of the Act. It is not required to be served within the period of limitation. The apex court in the case of R.K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163 and CIT v. Major Tikka Khushwant Singh [1995] 212 ITR 650 (SC) has held that from the 1922 Act the position regarding service of notice under section 148 has undergone a sea change in the 1961 Act and the only requirement for taking action for issuance of notice under section 148 is that the notice should be issued within the period of limitation. Thus, the notices issued is held to have been issued within the prescribed period of limitation under section 148 of the Act. Under section 147 of the Act t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he failure to fulfil that condition would vitiate the entire proceedings as held by the apex court in the case of Johri Lal (HUF) v. CIT [1973] 88 ITR 439 (SC) and Sheo Nath Singh v. AAC of I.T. [1971] 82 ITR 147 (SC). The reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of 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 far fetched, 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 ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 would not give jurisdiction to the Assessing Officer to initiate proceedings. In the case of Chhugamal Rajpal [1971] 79 ITR 603 (SC) the following report was submitted by the Income-tax Officer, Muzaffarpur, to the Commissioner: "During the year, the assessee has shown to have taken loans from various parties of Calcutta. From D.I.'s Inv. No. A/P/Misc.(5)D.I./63-64/ 5623, dated August 13,1965, forwarded to this office under the Commissioner of Income-tax, Bihar and Orissa, Patna's letter No. Inv. (Inv.) 15/ 65-66/1953-2017, dated September 24,1965, it appears that these persons are name-lenders and the transactions are bogus. Hence, proper investigation regarding these loans is necessary. The names of some of the persons from whom money is alleged to have been taken on loan on hundis are: 1. Seth Bhagwan Singh Sricharan, 2. Lakha Singh Lal Singh, 3. Radhakissen Shyam Sunder. The amount of escapement involved amounts to Rs. 1,00,000. (Sd.) S.P. Chaliha, 30-4-1966. Income-tax Officer, A-Ward, Muzaffarpur. The apex court had found that the report of the Income-tax Officer does not set out any reason for coming to the conclusion that this is a fit case to iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. On receiving notices under section 148 the appellant filed the returns. The appellant also received notices under section 143(2) calling for further information on certain points in connection with the returns. Thereupon the appellant filed writ petitions challenging the notices. The High Court dismissed the writ petitions holding that the petitions were premature and the appellant could raise its objections to the notices by filing reply to the notices before the Assessing Officer. The appellant preferred appeals and the Supreme Court dismissed the appeals, observing that since the reasons for reopening of assessments under section 148 had been disclosed in respect of five assessment years, the Assessing Officer had to dispose of the objections, if filed, by passing a speaking order before proceeding with the assessments for those years." The Constitution Benches of the hon'ble Supreme Court, in K.S. Rashid and Son v. Income-tax Investigation Commission [1954] 25 ITR 167 AIR 1954 SC 207; Sangram Singh v. Election Tribunal, AIR 1955 SC 425; Union of India v. T.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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