TMI Blog2003 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of 1994 (Geo Miller and Co. Ltd. v. Deputy CIT [2002] 254 ITR 620), respectively. The learned judge was pleased to dismiss both the writ petitions after considering the relevant position in facts and proposition of law, which have since been assailed in these appeals. The moot question we are required to consider is the validity and legality of the notices, all dated July 29, 1994, issued by the respondent-Income-tax Department under section 148 of the Income-tax Act, 1961, for reopening the respective assessment under section 147 for the assessment years 1984-85 to 1989-90 and 1985-86 to 1989-90, respectively, in the two cases. Dr. Pal has contended that there was an embargo of a period of four years in reopening the assessment in respect of cases falling under clause (b) of section 147 as it stood prior to April 1, 1989, where the assessment is sought to be reopened on the ground other than failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for assessment (read with clause (b) of sub-section (1) of section 149). After the amendment, the proviso to section 147 provides similar four years embargo on grounds other than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 is subject to section 149. In case of information other than the assessee's default, the limitation is four years as provided in clause (b) of section 149(1). But then section 149(2) makes the provision contained in section 149(1) subject to section 151. By reason of the provision contained in section 151, the embargo of four years provided in clause (b) of section 149(1) is subject to extension with the sanction of the Commissioner as provided in section 151. Therefore, it can be reopened even after four years. Both Mr. Ghosh and Mr. Som have attempted to show that this case would be governed by the unamended provisions since the relevant assessment years were decided on the basis of unamended provisions. Both of them have dealt with the unamended provisions at length in order to bring home their case. At the same time, they have also dealt with the amended provision alternatively to support their contention and have contended that their case stands on a better footing under the amended provision. This is also supported by Dr. Pal that if the case is to be governed under the unamended provision, then he would stand on a better position; but, however, he cannot take ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prescribed that cases falling under clause (a) were to be divided in sub-clauses (i) and (ii). Sub-clause (i) enabled reopening up to eight years, and (ii) up to 16 years in respect of cases covered under clause (a) of section 147. But section 149(1)(b) governed cases covered under section 147, clause (b), where notices could not be issued after the expiry of four years from the relevant assessment year. Sub-section (2) of section 149 made the provision of section 149 subject to section 151, while section 147 was subject to section 148 to section 153. Section 151(1) prescribed that no notice under section 148 after the expiry of eight years could be issued unless the Board was satisfied on the reasons recorded by the Income-tax Officer (the ITO) that it was a fit case for issue of such notice. Under section 151(2) if four years had expired from the relevant assessment year then no notice under section 148 could be issued unless the Commissioner was satisfied on the reasons recorded by the Income-tax Officer that it was a fit case for issuing such notice. Mr. Som has contended that since section 147 was subject to sections 148 to 153, therefore, all these provisions were to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically provides for conferring of such discretion on them. Section 151 was not a provision, which enabled the Revenue to do something. It was a restriction on the Revenue prohibiting it from doing something. It was a guidance to do such things in the manner provided in section 151. These were provisions to protect the interest of the assessee. Therefore, it was to be read in consonance with section 149(1)(a), clauses (i) and (ii), where eight year and sixteen year embargo respectively were provided for. Even when this power was exercised by the Revenue after four years, it required the sanction of the Commissioner even though reopening could be made up to eight years. If it was done after the expiry of eight years and even though it could be done for a period of sixteen years after the expiry of eight years in cases coming under clause (ii), it could be done only with the approval of the Board and not otherwise. Therefore, the scheme of these provisions clearly indicated to have been provided for protecting the interest of the assessee when reopening after four years under section 149(1)(a)(i) and (ii), respectively, and not empowering the Revenue to overcome the embargo provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides that no notice under section 148 for the relevant assessment year shall be issued for reopening under section 147 after the expiry of four years from the end of the relevant assessment year unless the case falls under sub-clause (ii) or sub-clause (iii). Sub-clause (ii) covers cases after four years but not exceeding seven years if the income escaped assessment is Rs. 50,000 or more. Sub-clause (iii) covers cases after seven years but not exceeding ten years in respect of escaped income amounting to Rs. 1 lakh or more. Whereas clause (b) deals with cases other than those falling under section 143(3) or section 147 with which we are not concerned. By reason of sub-section (2) of section 149, section 149(1) is subject to section 151. Under section 151(1), no notice under section 148 for reopening of assessment under section 147 shall be issued by an Assessing Officer below the rank of the Assistant Commissioner unless the Deputy Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for issue of such notice. By a proviso added to sub-section (1) of section 151, it is prescribed that no notice shall be issued after the expiry of four yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simply be a wastage of time and energy since the tax that might be charged would be too insignificant compared to the endeavour undertaken after the expiry of four years. Thus, the four years exception even in cases coming under any of the four conditions provided in the proviso to section 147 are to be governed by section 149(1)(a). But, if it is within four years, then none of these restrictions would stand in the way. The object was to bring a finality to an assessment made with the restrictions imposed. Under section 147, no action can be taken. If no action can be taken, no notices can be issued. If after the expiry of four years on certain conditions action can be taken, then only notices can be issued. When notices can be issued, then only section 149 can become operative. When the action is permissible, notice can be issued under section 148. But when action cannot be taken but for the exceptional conditions, then the restriction for issuing notice under section 148, as provided in section 149(1)(a) shall come into play. It also forbids issuing of notice after four years unless it comes under sub-clauses (ii) and (iii) to bring an end period of seven years and ten years, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are satisfied. It is contended on behalf of the respondent that none of the conditions provided in the proviso to section 147 as submitted by Mr. Som could be attracted in the present case. Therefore, the period of four years' embargo provided in the proviso cannot be stretched even though this provision might be subject to sections 148 to 153. Even after making the provision of section 147 subject to sections 148 to 153 a proviso has been added by which an exception has been carved out. The principal section cannot be read without the proviso, which qualifies the principal section, The qualification is expressed in mandatory form. It has used the expression "no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year". Therefore, it is a question of action. The decision to issue notice and recording of reasons before issuing the notice are actions within the meaning of the proviso to section 147 for the purpose of exercising jurisdiction under section 147. Therefore, such action cannot be taken after the expiry of four years unless the four contingencies in the proviso to section are in existence. Whereas section 149 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the question of following the same by notice does not arise. If there is no scope of issuing notice, the provision relating to the manner in which the notice is to be issued does not arise. Admittedly, it is a the threshold that the notice under section 148 is under challenge. Therefore, the other questions are not relevant for the present purpose. Mr. Som has contended that this power to reopen is dependent on four conditions. In this case, notices under section 148 had since been issued. The assessee had not responded to the same. Instead it had come before this court to challenge the same in the writ proceedings. Therefore, this case attracts the mischief excepted in the proviso to section 147. Therefore, the writ petition should fail. This proposition does not carry any substance. Here the very jurisdiction or authority to issue the notices under section 148 has since been challenged. We are to deal with a situation at the threshold of issuing of the notices, viz., at a stage prior to the issuance of the notices or a stage leading to the decision to issue the such notices, or, in other words, to a situation that empowers the authority to assume the jurisdiction to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egation that the amounts now sought to be made taxable were not disclosed. On the other hand, these were disclosed but claimed to be non-taxable. Therefore, it cannot be said that there was any omission or failure to disclose fully and truly the materials necessary for assessment. After disclosing such materials if exemption from taxability is claimed by reason of the provision of law as the assessee had understood, it would not be an omission or failure to disclose the materials fully and truly relevant for assessment. It is the inference drawn on the materials produced that is relevant for the Assessing Officer. Such inference is not dependent on the understanding of the law of the assessee or the claim made by it. Therefore, there is no scope for bringing this case within the scope and ambit of non-disclosure of materials fully and truly. The very statement made in the affidavit by the Revenue discloses that it had proposed to reopen the assessment only on the basis of the information derived by it from the decision in N.C. Budharaja's case [1993] 204 ITR 412 (SC), not on the basis of anything else. As such the question of four years embargo cannot be overcome by the Revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years..." In the said decision, on the question of omission to disclose, it was held that: "... 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. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences-whether of facts or law-he would draw from the primary facts." Dr. Pal has relied on the decision in Raj Kumar Bapna v. Union of India [2001] 251 ITR 802 of the Rajasthan High Court. Dr. Pal then relies on the decision in Tantia Construction Co. Ltd. v. Deputy CIT [2002] 257 ITR 84 (Cal), which had followed the decision in N.C. Budharaja's case [1993] 204 ITR 412 (SC) and had held that unless there is any failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uram Horilram Ltd. v. CIT [1955] 27 ITR 709 (SC) or that a case has been overruled (CIT v. Sir Mahomed Yusuf Ismail [1944] 12 ITR 8, 15 (Bom); Maharaj Kumar Kamal Singh v. CIT [1954] 26 ITR 79 (Patna); Mooljee Sicka and Co. v. Second Addl. ITO [1960] 40 ITR 163 (Cal); A.R. Balakrishnan v. CIT [1974] 96 ITR 469 (Mad)), or that a statute had been passed which was not brought to the attention of the Assessing Officer when he made the original assessment in CIT v. Sir Mahomed Yusuf Ismail [1944] 12 ITR 8, 15 (Bom); ITAT v. B.P. Byramji and Co. [1946] 14 ITR 174 (Nag); D.R. Dhanwatay v. CIT [1956] 29 ITR 257 (Nag) and Asghar Ali Mohammad Ali v. CIT [1964] 52 ITR 962 (All), or that a statute had been passed after he made the original assessment. The decision of a higher authority under this Act,--e.g., on the question as to which an assessable entity is chargeable in respect of a particular income, or whether the income is chargeable for a particular year, or what is the correct method of computing income, or whether a receipt is income or capital gain, or whether an expenditure is on revenue or capital account, or whether a firm is genuine, may also constitute 'information'. On the stre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of law as given earlier was not legal it in effect means that the law as it stood from the beginning was as per its decision and that it was never the law otherwise. The interpretation placed on the action based on the erroneous view of law is also equally erroneous..." Mr. Som then relies on the decision in Smt. Nirmala Birla v. WTO [1976] 105 ITR 483, 496 (Cal) [FB], wherein it was held "that there is no bar to a notice under clause (a) being treated as a notice under clause (b). If having launched reassessment proceedings under clause (a), the Income-tax Officer may proceed under clause (b),... The basic assumption in the cases reported in P.R. Mukherjee v. CIT [1956] 30 ITR 535 (Cal); Kantamani Venkata Narayana and Sons v First Addl. ITO [1967] 63 ITR 638 (SC) and Mriganka Mohan Sur v. CIT [1974] 95 ITR 503 (Cal) is that it is possible to form alternative beliefs...He may believe that the escapement was due to omission or failure of the assessee to disclose fully or truly all material facts. He may also believe that even if there was no failure or omission on the part of the assessee, the new facts compose information in his possession which call for reassessment of e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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