TMI Blog2000 (8) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ications under sub-section (2) of section 4 of the Indian Telegraph Act, 1885 (in short, "the Telegraph Act"), initially for a period of five years and it was subsequently extended from time to time and the last extension is valid for a period of 15 years, with effect from April 1, 1998. The petitioner was paying licence fee of Rs. 101 in terms of the licence from the financial years 1986-87 to 1992-93, the relevant assessment years being 1987-88 to 1993-94. Such payment was made to the Department of Telecommunications, Government of India. Subsequently, licence fees were enhanced to Rs. 800 as intimated to the petitioner vide letter No. 2610/94-TA I, dated May 13, 1994, and the licence fees was further enhanced to Rs. 900 per WDEL with effect from the financial year 1995-96. The present dispute relates to the assessment year 1994-95. A return of income for the said year was filed on November 30, 1994. A sum of Rs. 1,24,85,60,000 was claimed as licence fee. There was no such claim for the preceding year. Intimation in terms of section 143(1) of the Act was given to the petitioner. Subsequently, a notice under section 148 of the Act was issued on March 23, 1999, requiring it to file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it was a clear case of mere change of opinion about the acceptability of the claim which is in issue. It is to be noted that section 143(1) has undergone a change by the Finance Act, 1999, with effect from June 1, 1999. Mr. Salve, learned Solicitor-General, on the other hand, submitted that at the stage of intimation under section 143(1), there is no scope for any assessment. On the contrary, adjustment of items of expenses/receipts as spelt out in the provision itself is the permissible limit of exercise of powers under the provision. There is no question of the Assessing Officer considering or applying his mind to anything beyond that aspect. The intimation is the result of ministerial work and cannot be termed to be an assessment for the purposes of the Act. The requirements under section 148 are that there must be reasons to believe about escapement or underassessment. The requisite ingredients are present in the case in hand and, therefore, the action as taken is clearly permissible. The question of change of opinion is not relevant in the light of the provisions contained under sections 147 and 148 of the Act as they presently stand. Further, the committee set up to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee : Provided that except as otherwise provided in this sub-section, the acknowledgment of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him : Provided further that no intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the income was first assessable..." Before amendment : Section 143(1) as it stood at the point of time when the intimation was given under the said provision, so far as relevant, read as follows : "143. (1)(a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,--- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. Explanation 1.---Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.---For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows : (a) an arithmetical error in the return, accounts and documents accompanying it were to be rectified ; (b) any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return was to be allowed ; (c) any loss carried forward, relief claimed in the return which on the basis of the information as available in such return, accounts or documents were prima facie inadmissible was to be disallowed. What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction, allowance or relief, which was prima facie admissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from October 1, 1991, and subsequently with effect from June 1, 1994, by the Finance Act, 1994, and ultimately omitted with effect from June 1, 1999, by the Explanation as introduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between June 1, 1994, to May 31, 1999, and under section 264 between October 1, 1991, and May 31, 1999. It is to be noted that the expressions "intimation" and "assessment order" have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes "the computation of income", sometimes "the determination of the amount of tax payable" and sometimes "the who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that subsection. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." Section 147 prior to its substitution by the Direct Tax Laws (Amendment) Act, 1987, stood as follows : "147. Income escaping assessment.---If--- (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd, [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC)). The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied, firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, and, secondly, he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is erroneous and should have been disallowed. It is so on account of the fact that the expenditure is application of income and does not tantamount to diversion of income by overriding title. 2. On the facts of the case I have reasons to believe that income chargeable to tax of Rs. 1,24,85,60,000 has escaped assessment for the assessment year 1994-95. Accordingly, notice under section 148 read with section 147 is issued to bring to tax the aforesaid amount. Notice signed may issue." This cannot be said to be a case where initiation of proceedings in terms of notice under section 148 can be said to be without jurisdiction or foundation. The reasons indicated cannot be said to be non-relevant. While deciding the validity of a notice under section 148, the permissible limit of consideration is the existence of reasons and, as indicated above not sufficiency thereof. Looked at from any angle, the notice issued under section 148 of the Income-tax Act cannot be said to be invalid. We do not find any merit in this writ petition, which is accordingly dismissed. However, in view of the peculiar circumstances of the case, there will be no order as to costs. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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