TMI Blog2002 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied that there are reasons to believe that the income has escaped assessment. Though, the reason cannot be judged as to its sufficiency, yet the court can examine as to whether there are any reasons disclosed in the order of reopening. The notice was issued without the sanction of the Deputy Commissioner as was required under section 151. On the merits, it was contended that the ground on which income was alleged to have escaped assessment was disclosed by the assessee. This was noted by the Assessing Officer. But the Assessing Officer did not disclose the said question in the assessment order. This according to him, cannot be a ground for reopening, unless it is shown, when the time limit of four years is applicable, that there was failure as contemplated in the proviso to section 147. But no such reason has been recorded. The two conditions provided in section 147, namely, the reasons to believe and failure to disclose fully and truly, are mandatory and must be satisfied before a case is reopened. These provisions are conditions precedent for exercising jurisdiction. These data having not been satisfied, the reopening is incompetent and without jurisdiction. He relied on Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a case of underassessment and as such it is a case of escapement of assessment within the meaning of the proviso. That the materials produced before the Assessing Officer cannot be a ground to contend that the materials were disclosed truly and fully, in view of Explanation 1, which stands in the way of the petitioner's contention. According to him, if there is a mistake in terms of section 292B, the same also can be the subject-matter of reopening. He relied on Sardar Harvinder Singh Sehgal v. Asst. CIT [1997] 227 ITR 512 (Gauhati). According to him, a prima facie satisfaction is to be found out. The sufficiency or correctness of the reasons to believe for reopening cannot be gone into by the court. He relied on Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC); Hindustan Aluminium Corporation Ltd. v. ITO [2002] 254 ITR 370 (Cal); Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC). He contended further that these objections, which are being now raised, can also be examined by the Assessing Officer and, therefore, this court should not exercise jurisdiction and the matter should be relegated before the Assessing Officer. He referred to Dr. Jagannath Mishra v. CIT [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The proviso to section 147 provides that no assessment can be reopened under section 147, if the earlier assessment was made under section 143(3), after the expiry of four years from the end of the relevant assessment year. In the present case, the earlier assessment, admittedly, being one under section 143(3), the proviso debars reopening of the assessment in respect of this case. The four years period provided therein expired in 2000. Therefore, this assessment is sought to be reopened after the four years embargo provided in the proviso. However, such reopening can be made in certain exceptional cases. According to Mr. Mitra, this is one such exceptional case. The exception provided in the said proviso prescribes that even after the expiry of four years, assessment can be reopened on two conditions that there was a failure on the part of the assessee to submit a return either under section 139 or in response to a notice under section 142(1) or section 148. The present case, admittedly, does not come under this condition since the assessment was made under section 143(3), it is not a case of failure to submit return or to respond to a notice under section 142(1) or under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than section 143(3). In such a case it can be re-opened even beyond four years provided any of the two conditions are satisfied. The present case does not fall within the first condition of non-submission of return or non-response to notice. It can be reopened if the assessee had failed to fully and truly disclose all material facts necessary for the assessment. Counsel for the petitioner has pointed out that there was no allegation of failure to disclose fully and truly all material facts. Before issuing notice in view of section 148, the materials must be deemed to be present on record. Now let us examine as to how far the reasons recorded justify the reopening. Mr. Mitra had produced the reasons, which runs as follows: "In this case, the return for the assessment year 1995-96 was filed on November 30, 1995, showing a total income of Rs. 1,73,960. The income had been assessed under section 143(3) on March 31, 1998, at Rs. 1,73,960. In the course of hearing, it was detected that the assessee made payment of Rs. 1,79,52,909 in cash in violation of section 40A(3) of the Income-tax Act, 1961. But in the assessment order passed under section 143(3) on March 31, 1998, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash payments to the other two parties. Thereafter, the assessment was made under section 143(3) on March 31, 1998. Section 40A(3) has two provisos. The second proviso provides that no disallowance under the said sub-section shall be made, if any payment is made beyond the prescribed amount otherwise than by a crossed cheque drawn on a bank or a crossed bank draft, having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors. In the present case, there were certain materials, as is apparent from the certified copy of the order sheet produced, to explain the considerations of business expediency and other relevant factors to the extent that such cash payment was demanded by the payee for lifting the goods from the warehouse on payment of excise duty, which is alleged to be payable in cash. These explanations might have satisfied the Income-tax Officer with regard to the question of disallowance being excepted in view of the second proviso to section 40A(3). Inasmuch as, the terms of this section 40A(3) are absolute but subject to some relaxation. Considerations of business expediency and other relevant fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bring it within the exception provided in the proviso to section 147 for reopening the assessment. If there are sufficient materials to draw a particular inference, omission to deal with the same cannot be constituted to draw an inference adverse to the assessee, at a subsequent stage hit by the proviso to section 147. Since such benefit are to be held in favour of the assessee, the omission to deal with the same is to be construed to mean that the Assessing Officer was satisfied with the question and as such he had not dealt with the same. But then it is not the question of dealing with a particular point by the Assessing Officer. It is the question whether there was failure on the part of the assessee to disclose fully and truly all materials facts necessary for assessment. If facts are disclosed fully and truly necessary for assessment, the liability of the assessee ends. Whether it is dealt with or not is wholly immaterial. The only point, on which jurisdiction can be assumed, is the failure to disclose fully and truly material facts necessary for assessment. Admittedly, so far as Rs. 1,78,15,909 is concerned, the assessee appears to have fully and truly disclosed material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. The court could not have judged the sufficiency of the reason, but it can see whether such reason is present. Here no such reason has been disclosed that there was a failure on the part of the assessee. On the other hand, from the tenor of the order, it appears that the payment was made in contravention of the provision of section 40A(3), but there was no indication that this was because of failure to disclose. Thus, this case cannot be brought within the purview of the proviso to section 147 to reopen the assessment. Therefore, the notice issued appears to be without jurisdiction and no proceeding can be taken out of such notice. The decisions cited on behalf of the petitioner: In Lakhmani Mewal Das' case [1976] 103 ITR 437, the apex court while dealing with this question had held that if on the basis of the facts disclosed, the Income-tax Officer draws an inference, which subsequently appears to be erroneous, mere change of opinion with regard to such inference would not justify initiation of action for reopening the assessment. It had further held that the conditions must be satisfied before the Income-tax Officer acquires jurisdiction to issue notice under section 148 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997] 11 SCC 285, it was held that the assessee during the original assessment having produced relevant materials, it cannot be said that there was a failure on the part of the assessee to disclose primary materials. In Calcutta Discount Co. Ltd.'s case [1961] 41 ITR 191, the Supreme Court had held that underassessment must occur by reason of failure on the part of the assessee to make a return or to disclose fully and truly the material facts. Both these are conditions precedent to be satisfied before the Income-tax Officer may assume jurisdiction to issue such notice for assessment or reassessment. The only question to be considered is whether the Income-tax Officer had reason to believe that there had been some omission or failure to disclose fully and truly all material facts necessary for assessment. It was further held, once the primary facts are before the assessing authority, he requires no such assistance by way of disclosure. It is the duty of the assessee to disclose fully and truly all primary relevant facts. The duty of the assessee does not extend beyond this. Before assuming such jurisdiction, the Income-tax Officer must be prima facie thinking that there were some n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in order to enable the authority to assume jurisdiction. Can section 292B be attracted: The reference to section 292B of the Income-tax Act by Mr. Mitra is out of place inasmuch as, section 292B deals with invalidation of return of income, assessment, notice, summons or other proceedings furnished or made or issued or taken or purported to have been furnished or made or issued or taken under the Income-tax Act by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceedings if the return of income, assessment, notice, summons or other proceedings is in substance and effect not in conformity with or according to the intent and purpose of this Act. Even we apply this provision, then, as observed earlier, the reopening of the assessment does not seem to be in conformity with or according to the intent and purpose of the Act, namely, the reasons to believe that there was failure to disclosure on the part of the assessee. Can this court entertain the objections: Jurisdictional facts: Mr. Mitra had contended that all these objections can be raised and decided by the Assessing Officer. But when it is a question of jurisdiction, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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