TMI Blog2000 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." Under section 148(2) of the said Act, the Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. This part of the aforesaid section is making room for the purpose of the applicability of section 147 as aforesaid on account of issue of notice where income has escaped assessment. The petitioner has made out a case that neither there is a reason of omission or failure on the part of the assessee to make a return for the relevant assessment year to the Income-tax Officer nor income chargeable to tax has escaped assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to Gillanders Arbuthnot and Co. Ltd. and the information received from the Revenue audit is information within the meaning of section 147 for initiating proceedings under section 147(b)." Therefore, it is crystal clear from such affidavit-in-opposition that the case of the year 1973-74 was reopened on the basis of the audit objection. In reply thereto, the petitioner has made out the following statements in their affidavit-in-reply : "(7) With reference to the allegations contained in paragraph 6 of the said affidavit and sub-paragraphs (a) and (b) thereof, I say as follows : (a) In the course of the original assessment proceeding, the petitioner duly disclosed all primary facts including the fact of share holding by Gillanders Arbuthnot and Co. Ltd. of the petitioner-company as also the agreements which the petitioner-company entered into with the said Gillanders Arbuthnot and Co. Ltd. under which selling commission, rent and guarantee commission were paid by the petitioner-company to the said Gillanders Arbuthnot and Co. Ltd. The aforesaid facts will also appear from the letter dated July 16, 1975, being annexure 'A' to the writ petition. (b) In the course of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrived at by the Revenue audit and not by the assessing Income-tax Officer. (9) With reference to paragraphs 8 and 9 of the said affidavit, I repeat and reiterate the statements made in paragraphs 5, 6, 7 and 8 of the petition as also the statements made in paragraph 7 of the affidavit-in-reply and deny all allegations which are contrary thereto and/or inconsistent therewith. I deny in particular the information on the basis of which the proceedings were initiated under section 147(b) of the Act can be validly received from the Revenue audit as alleged or at all. I say that what the Revenue audit had communicated to respondent No. 1 cannot be construed as information within the meaning of section 147(b) of the Act. I deny further that the increase in the rate of commission was found to have no bearing on the extent of services rendered by the company acting as selling agent who were acting previously as secretaries and treasurers as alleged or that the same position applies to the information about payment of rent payable by the petitioner to the said company being Gillanders Arbuthnot and Co. Ltd., as alleged or at all. I deny also that the information received from the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether reopening is permissible after the audit party expresses an opinion on a question of law is now being considered by the larger Bench of this court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of the factual error pointed out by the audit party is permissible under law. Therefore, it has to be understood under the proper perspective there under as to under what circumstances the judgment was delivered. The factual basis is that the case relates to the assessment year 1974-75 and 1975-76. The relevant accounting year ended on March 31, 1974, and March 31, 1975, respectively. Originally, the assessment was completed on June 21, 1977. There were various other proceedings which ended in the Tribunal. The Tribunal after considering all the aspects of the cases remanded the cases back to the Income-tax Officer for passing a fresh order in accordance with law. One of the points raised before the Income-tax Officer was that of justification for reopening of the assessment. It was pointed out that reopening has been done on the basis of the report made by the audit departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner, has contended before this court that the facts were there before the appropriate authority. It is not the case that there is any omission or failure but final inference has been drawn on the basis of the audit report that the income escaped which is nothing but a final conclusion one of law. Under such circumstances, it cannot be said that the same can be reopened as alleged or at all. Mr. Prasad, learned counsel appearing on behalf of the respondent authorities, contended before this court that the reasons are internal but when notice is to be given there must be reason to believe that income escaped from notice. He cited three judgments. Firstly, he cited a judgment reported in CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) saying that for a commencement of the proceedings for reassessment, all the materials which came to the notice of the Income-tax Officer, are not necessary but the previous order of assessment is vitiated by some error of fact or law. He further submitted on the basis of S. Narayanappa v. CIT [1967] 63 ITR 219 (SC) if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Beedies Pvt. Ltd. [1999] 237 ITR 13 (SC). Therefore, either it is not a reason to believe but a reason to suspect or it is not an information but opinion of the internal audit party, therefore, in both ways the notice is not tenable in law. So far as the last part is concerned it is crystal clear from the affidavit of the authority that conclusion was arrived at by the Revenue audit, therefore, the same is an opinion which cannot be the basis for reopening of assessment as per the ratio of the judgment reported in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC). So far as the word "suspect" is concerned, the same ought to stand on a fact of omission or failure on the part of the assessee which is also not the case of the authority, therefore, there is no reason even to suspect. Hence, there is no finding of service of notice at all. In addition to the above I would like to point out that the ratio of CIT v. P. V. S. Beedies Pvt. Ltd. [1999] 237 ITR 13 (SC) is not factually applicable here. The said case was a case of remand by the Tribunal to the Income-tax Officer where such point was taken. Therefore, the same was not a closed chapter but continuance of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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