TMI Blog2007 (1) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... years from the end of the assessment year in which the income was first assessable or one year from the end of the financial year. A perusal of its second sub-section makes it clear that proceedings u/s 147 are altogether-different to those under section 143. This distinction appears to have escaped the attention of the Revenue. Sub-section (2) stipulates that no order u/s 147 shall be made after the expiry of one year from the end of the financial year in which notice u/s 148 was served. The inescapable conclusion that would have to be reached is that while assessment proceedings remain inchoate, no fresh evidence or material could possibly be unearthed. If any such material or evidence is available, there would be no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not been opened u/s 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147, provided fresh material h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned notice it appears that the Assistant Director of Income-tax (for short the Assessing Officer (AO)) intends to reassess the income of the petitioner/assessee inter alia since the word assessed has been scored out. This is noteworthy since avowedly no assessment has in fact been framed. 2. The assessee had filed its return of income under section 139 of the Income-tax Act on October 31, 2002, for the assessment year 2002-03 declaring a nil taxable income and consequently seeking a refund of tax deducted/deposited. Exemption under section 90 of the Income-tax Act has been claimed in respect of income earned from technical handling . On January 19, 2004, a notice under section 148 of the Income-tax Act was issued in respect of the assessment year 2002-03. In response thereto the assessee filed its return of income once again declaring nil taxable income. The Assessing Officer thereupon issued a questionnaire dated March 21, 2005, inter alia, containing the following queries : 3. Why receipts from technical handling is not taxable, furnish the evidence regarding claim that receipt is covered under the Double Taxation Avoidance Agreement ? 4. What is technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated July 24, 2006, the assessee filed objections to the initiation of reassessment proceedings. Subsequently, a letter dated October 6, 2006, was issued by the Assessing Officer to the assessee granting it a final opportunity to comply with the notice under section 142(1) by October 12, 2006, failing which the Assessing Officer would make the assessment as per the provisions of section 144 of the Income-tax Act. It is at this stage that the present writ petition has been filed. 6. In respect of the assessment year 2003-04, on February 25, 2004, the assessee suo motu filed its return of income for the assessment year 2003-04 on the same lines as in the previous year. A notice dated December 29, 2004, under section 143(2) of the Income-tax Act came to be issued to the assessee, inexplicably at the address of its chartered accountant. This was followed by a notice, dated September 16, 2005, under section 143(2) of the Income-tax Act issued yet again at the address of the chartered accountant, followed by a notice under section 142(1) of the Income-tax Act dated October 10, 2005, raising certain specific queries one amongst them being : Please furnish details of all for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 12, 2004, the Income-tax Appellate Tribunal, Delhi-B Bench, has decided Lufthansa German Airlines v. Deputy CIT [2004] 90 ITD 310 and noted that as per article 8(4) of the Double Taxation Avoidance Agreement between India and Germany, the profit from the participation in a pool will not be taxable in India. But article 8(2) of the Double Taxation Avoidance Agreement between India and UK talks of participation in pool of any kind by enterprises engaged in air transport . The use of the word pools envisages that there could be several pools or understanding i.e. more than one. Here the word pool does not indicate a pool which is internationally recognized. The use of the word pools of any kind clearly indicates that it was in the nature of commercially understood meaning. But in the international aviation industry, there is only one pool i.e. IATP. Certainly, in the case of British Airways [2002] 80 ITD 90 (Delhi) it was not a case of participation in a pool. In the appellant' s case, it is participation in IATP only. This was the reason that the Income-tax Appellate Tribunal has to find out the meaning of the word pool in the case of British Airways Plc. Moreo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer that income chargeable to tax has escaped assessment. It appears to us that where an assessment has not been framed at all, it is not possible to posit that income has escaped assessment. Notice under section 147 calling upon the assessee to file its return of income would thereupon be issued with the consequence that the assessee would have to file its return of income. Simultaneously with or immediately after the assessee makes this compliance it would be entitled to be apprised of the reasons to believe which had constituted the springboard for section 147/148 action. The assessee would then have the right to file objections remonstrating against the assumption of reassessment proceedings which would have to be answered by the Assessing Officer before delving further in the assessment, reassessment or the re-computation proceedings as the case may be. Mr. Sabharwal' s contention that during reassessment since the Assessing Officer has to clarify the contents of the return and/or the escaped income notices under section 143(3) are to be issued within twelve months, is not free from doubt. He has not clarified as to whether this procedure can be fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k for all information necessary for framing the assessment. The only fetter on the amplitude of his discretion is that the assessment must be framed within the time limit set-down by section 153 which, in substance, is two years from the end of the assessment year in which the income was first assessable or one year from the end of the financial year. A perusal of its second sub-section makes it clear that proceedings under section 147 are altogether different to those under section 143. This distinction appears to have escaped the attention of the Revenue. Sub-section (2) stipulates that no order under section 147 shall be made after the expiry of one year from the end of the financial year in which notice under section 148 was served. 12. Section 147 of the Income-tax Act deals with the powers of the Assessing Officer to assess or reassess the income chargeable to tax which has escaped assessment. Section 148 contemplates making the assessment , reassessment or re-computation under section 147. Keeping the factual matrix before us in perspective, it becomes critical to define the word assess since the Assessing Officer is avowedly not reassessing or recomputing the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these words : assessment means the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case . 13. A clearance or notice or intimation under section 143(1) of the Act clearly falls beyond the parameters of this definition. In Punjab Tractors Ltd. v. Joint CIT [2002] 254 ITR 242 (P H) it was opined that it is not necessary that assessment should have been finalised under section 143(3) before it can be reopened under section 147, since an intimation under section 143(1) operates as an order of assessment unless the Assessing Officer proceeds to give notice under section 143(2) and passes an order under section 143(3). This very understanding of the law has been articulated by the Division Bench of the Allahabad High Court in Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 which, in turn, followed the view of the Calcutta High Court in Jorawar Singh Baid v. CIT (Assessment) [1992] 198 ITR 47, wherein it has been observed that (page 52) : the power that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund is not an empty formality. It assumes importance if such return had not been filed earlier. We have reproduced the note/order dated November 10, 1965, on the file pertaining to the assessment year 1963-64. In the file for the assessment year 1962-63 there is another note which is as under : 'Please see my note in 1963-64 file. Refund to be considered in the hands of the beneficiaries' . A mere glance at this note would show that it could not be said that the Income-tax Officer gave finality to the refund since no refund is granted either in the hands of the trust or in the hands of the beneficiaries. It is an inconclusive note where the Income-tax Officer left the matter at the stage of consideration even with regard to refund in the hands of the beneficiaries. This note was also not communicated to the trustees. When we examine the note dated November 10, 1965, on the file of 1963-64 nothing flows from that as well. In any case if it is an order, it would be appealable under section 249 of the Act. Since the period of limitation starts from the date of intimation of such an order, it is imperative that such an order be communicated to the assessee. Had the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he must have reason to believe that such escapement or under assessment was occasioned by reason, so far as relevant for the present purpose, to disclose fully and truly all material facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied. See, in this connection, the observations of this court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191. . . As is well-settled now by the several authorities of this court and of several High Courts, there must be materials to come to the conclusion that there was ' omission or failure to disclose fully and truly all material facts necessary for the assessment of the year' . It postulates a duty on every assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, an obligation is to disclose facts ; secondly, those which are material ; thirdly, the disclosure must be full and fourthly, true. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, for computing or determining the proper tax due from the assessee, it is necessary to know all the facts which help the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as) and Bawa Abhai Singh v. CIT (Deputy) [2002] 253 ITR 83 comprising Arijit Pasayat and D. K. Jain JJ. (as their Lordships then were). It is quite possible that had the court in Consolidated Photo [2006] 281 ITR 394 (Delhi) been made aware of the consistent opinion of this court in Jindal Photo [1998] 234 ITR 170 and Bawa Abhai Singh [2002] 253 ITR 83, their conclusion may have been totally different, notwithstanding the alternative view of the Gujarat High Court. 17. It also needs to be clarified that in Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173, the Division Bench of this court opined that an intimation under section 143(1)(a) cannot be treated to be an order of assessment. Therefore, although the assessment had been completed under section 143(1)(a), recourse could be taken to section 147. In that case while finalising the assessment for the assessment year 1996-97 under section 143 it was found that the claim of licence fee made by the assessee was erroneous and should have been disallowed. 18. The diametrically opposite position had arisen in CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC). It was held that in the reassessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for framing the assessment. This is not permissible in law. 20. Mr. Sabharwal, learned counsel for the Revenue, has also challenged the legal propriety of the present writ proceedings. We have already recorded our view on this aspect of the law in WP(C) Nos. 4997/2005, 5010/2005 and 5062 of 2005 titled Basu Distributors P. Ltd. v. ITO [2007] 292 ITR 29 (Delhi), Ward 2(3), New Delhi decided on December 15, 2006, and we do not intend to make this judgment prolix by reproducing them. Suffice it to state that wherever and whenever it appears to the High Court that proceedings have been initiated or are continuing without the authority of the law, the High Court would be in dereliction of duty if it hesitated in exercising the extraordinary powers contained under article 226/227 of the Constitution of India. In the present case since the Assessing Officer was duty-bound to conclude the assessment before resorting to section 147 of the Income-tax Act, it is our bounden duty to issue a writ of certiorari so as to bring these legal proceedings to a definitive halt. The dicta in GKN Drive Shafts [2003] 259 ITR 19 (SC) have been not duly followed since the objections filed by the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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