TMI Blog2000 (9) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the proceeding on the following grounds : (i) the instant proceeding initiated against the petitioner for reopening of the assessment is not on account of any failure on the part of the petitioner to disclose the material facts but on the basis of the enquiry made under sections 133(6) and 131 of the Act wherein it was found that the transaction entered into by the petitioner with the sub-contractor, namely, Sri K. N. Kutty, is a sham transaction which is not permissible in the eye of law ; (ii) the reopening of the completed assessment is barred by the doctrine of merger as the assessment order merged with the appellate order passed by the respondent-Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal ; (iii) the instant proceeding is sought to be initiated at the behest of the superior authority, namely, the Commissioner of Income-tax (Appeals) ; (iv) once the assessee has disclosed the true and full primary and jurisdictional facts, such proceeding cannot be initiated for the reopening of the assessment which is based upon true and full disclosure of the material evidence and, lastly, the very initiation of the instant proceeding is barred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn pursuant to the notice issued under section 148 of the Act. The notice was issued in order to verify the genuineness of the transaction made with the said Sri Kutty and during the enquiry it has come to the notice of the Joint Commissioner that the transaction between the petitioner and the said Kutty is a sham transaction. It is further alleged that no order was passed by the Income-tax Appellate Tribunal till date nor the Department has received such order passed by the Tribunal on the point in dispute. It is further stated that the notice under section 148 was issued on the basis of the enquiry which was conducted as per direction of the Commissioner of Income-tax (Appeals) for collecting additional evidence during the pendency of the appeal, on the contrary statement made by the petitioner to the effect that the notice was issued at the behest of the superior authority is not correct. It is denied in the counter-affidavit that the reason recorded by the respondent-Joint Commissioner was on the basis of the order passed by the Commissioner of Income-tax (Appeals). The issuance of notice was necessitated on the basis of the statement recorded by Sri Kutty with respect to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner. According to Mr. Jhunjhunwala, there is no provision in the law or in the rules framed thereunder to communicate the reasons recorded by the Assessing Officer. However, the reasons can be communicated to the assessee only after filing of the return in terms of notice issued under section 148 of the Act. Mr. Jhunjhunwala further submits that though the notice was issued on the basis of the enquiry conducted by the predecessor of the respondent-joint Commissioner albeit such notice can be issued in terms of the order passed by the respondent-Commissioner of Income-tax (Appeals). In support of his contention, learned counsel has relied upon a decision in the case of Saurabh Kumar Pandey v. CIT [1999] 235 ITR 150 (Patna). The Patna High Court in the case of Usha Beltron Ltd. v. Jt. CIT [1999] 240 ITR 728, has held the same view. The apex court in the case of ITO v. Purushottam Das Bangur [1997] 224 ITR 362, at page 369, observed as follows : "On the basis of the information contained in the letter of Shri Bagai and the documents annexed to it, the Income-tax Officer could have had reason to believe that the fair market value of the shares was far more than the sale pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, a claim was made to the tune of Rs. 5,71,980 on account of investment allowance under section 32A. It is alleged that in terms of the notice under sections 143(2) and 142(1) of the Act, the petitioner appeared along with the relevant documents and disclosed fully and truly material facts before the respondent Deputy Commissioner of Income-tax. The petitioner during the course of hearing filed material evidence, the statement showing the details of the expenses including the payment made to Sri Kutty which was verified by the respondent-Deputy Commissioner of Income-tax and after having been satisfied, accepted the transaction entered into by the petitioner with the said Kutty and, accordingly, the Deputy Commissioner passed an order of assessment under section 143(3) of the Act after full examination and verification of the entire evidence on record maintained during the regular course of his business. In the premises, therefore, it is submitted that once the petitioner has disclosed fully and truly the materials before the authority and the respondent authority after having accepted the same passed the order in terms of section 143(3) of the Act and, as such, proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur years is wholly illegal and without jurisdiction. As stated above, for the purpose of counting limitation, the proviso to section 147 is to be read along with section 149 of the Act which empowers the authority to issue notice reopening the assessment made under section 143(3) beyond four years if the income escaped from tax by reason of the failure on the part of the assessee. Explanation 2(c) appended to section 147 of the Act envisages "where an assessment has been made but (i) income chargeable to tax has been under assessed, or (ii) such income has been assessed at too low a rate, or (iii) such income has been made the subject of excessive relief under this Act, or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." It appears from the aforesaid provision that even after assessment is made in terms of section 143(3), notice under section 148 can be issued for income escaping assessment. In this connection, reference may be made to a decision of the apex court in the case of Phool Chand Bajrang Lal [1993] 203 ITR 456 wherein it has been held as follows : "One of the purposes of section 147 is to ensure that a party cannot g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not open to an assessee to seek a review of the concluded item, unconnected with the escapement of income, for the purpose of computation of the escaped income." Thus, the assessee cannot challenge the notice initiating the proceeding in terms of section 147 of the Act merely on the ground that the completed assessment cannot be reopened which is devoid of principle of law as enunciated by the Supreme Court in the case aforesaid. In the case of Phool Chand Bajrang Lal [1993] 203 ITR 456, the apex court has held that subsequent information which is definite, specific and reliable can be a basis for initiating reassessment proceedings. It has also been held that sufficiency of reasons for forming the belief is not-for the court to judge. Similar is the view taken by the apex court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 and in the case of Purushottam Das Bangur [1997] 224 ITR 362. In the case of Usha Beltron Ltd. v. Jt. CIT [19991 240 ITR 728, this court has held that the finding recorded during the course of investigation that depreciation had been claimed on a non-existent asset and reopening was held to be quite legal. After having heard learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X
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