TMI Blog1998 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2, after scrutiny and the assessment order was passed on November 17, 1989. On March 31, 1992, however, the impugned notice, dated March 20, 1992, under section 148 of the Act was served on the petitioner alleging that respondent No. 2 had reasons to believe that income chargeable to tax had escaped assessment within the meaning of section 147 and he proposed to reassess the same and, accordingly, requiring the petitioner to submit the return in the prescribed form within 30 days of the service of notice. The petitioner made an application requesting respondent No. 2 to furnish the reasons leading to formation of his opinion within the meaning of section 147 of the Act and, later, also requested him to treat the original return filed on July 27, 1988, as the return (under protest) in compliance with the impugned notice under section 148 and, ultimately, getting no response from the respondent, filed the present writ petition in this court. The case of the petitioner, briefly indicated, is that in order to confer jurisdiction on the Assessing Officer for issuing show-cause notice under section 148 of the Act, the following pre-conditions must be satisfied : (a) there must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fts for which no details available'. The returns of income filed by the aforesaid alleged creditors are barely above taxable limit which proves they do not possess necessary creditworthiness for extending such loans as claimed. It is clear from aforesaid discussion that the capital has been built up on paper in the names of alleged creditors and after sufficient accumulation of funds on paper without having actually earned the income and real savings, the loans have been extended. In most cases cash has been deposited in the bank account before issue of the cheque. Hence, the credits appearing in the name of the aforesaid persons in the books of account of the assessee-firm are unexplained cash credits which were required to be treated as deemed income under section 68 for the assessment year 1988-89 in the hands of the assessee-firm. I have, therefore, reasons to believe that due to the failure of the assessee-firm to disclose the material facts truly and fully, the taxable income escaped assessment for assessment year 1988-89." Mr. K. N. Jain, learned counsel for the petitioner, submitted that all material facts having been disclosed by the petitioner, it must be held that it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relates to the assessment year 1988-89, the relevant accounting year being July 9, 1986, to June 27, 1987, I have no doubt in my mind that it would be the unamended provisions which would govern the case. If a particular act does not constitute any offence or does not involve any consequence, the person committing such act cannot be held liable if the same very act becomes an offence and liable to penal consequence by virtue of some subsequent law. He cannot be punished for committing that act merely because some penalty is prescribed later for the same. In order to find out the distinction between the unamended provisions of section 147 and the provisions as they stand after April 1, 1989, and their effect, it would be appropriate to quote the two sets of provisions, so far as relevant as hereunder : Section 147 as it stood prior to April 1, 1989 : "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 or truly all material facts necessary for his assessment for that year, income chargeable to tax h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had reason to believe that income chargeable to tax had escaped assessment by reason of : (a) omission or failure on the part of an assessee to make a return under section 139 for any assessment year, or (b) to disclose fully and truly all material facts necessary for his assessment for that year. As is evident from the amended section, in contradistinction to the original unamended section, requiring fulfilment of twin conditions spelt out in clause (a) of section 147 or in clause (b) of the said section, as conditions precedent for issuing notice under section 148 of the Income-tax Act, it is not so in the amended section and the only condition for action now is that the Assessing Officer should have reason to believe that income has escaped assessment which belief can be reached in any manner, and is not qualified by the pre-condition of full and true disclosure of material facts by an assessee, as contemplated under the old section 147(a) of the Income-tax Act. An Assessing Officer can now legitimately reopen the assessment in respect of an income which has escaped assessment. Undoubtedly, under the new section, power to reopen assessment is much wider and can be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether of facts or law, should be drawn. The court further observed that after the assessment has been completed there should be some prima facie grounds for thinking that there has been some non-disclosure of material facts. In the case of Simon Carves Ltd. [1976] 105 ITR 212 (SC), rule 33 of the Income-tax Rules, 1922, permitted assessment of a non-resident company carrying on business as construction engineers in one of the three modes as mentioned in the rule. The Income-tax Officer computed the income applying one such mode which resulted in lower tax liability. Subsequently, the assessment was reopened and applying a different mode of assessment, which also was permissible, the Income-tax Officer determined a higher income. On a reference the High Court held that this was not a case of income escaping assessment. The Supreme Court affirmed the decision of the High Court. It held that rule 33 vested discretion in the Income-tax Officer to select one of the three modes for determining the taxable income and the mere fact that the mode of computation had resulted in lower tax liability is not sufficient for holding that the discretion was not exercised in a proper and judicio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in view of a finding in the course of assessment in the subsequent year that the particular loan was not genuine. The Calcutta High Court held that there was no failure to disclose material facts for the relevant assessment year and the reassessment proceedings were not in accordance with law. Their Lordships observed that in order to bring a case within the ambit of section 147 of the Act it is for the Revenue to establish that the assessee has failed to disclose a fact or material correctly or truly which has resulted in under-assessment of the income. As long as the material facts with contemporaneous records and documents are placed before the Income-tax Officer, at the time of original assessment, the assessee can be said to have done his duty. Thereafter it is for the Income-tax Officer to investigate and then to accept or reject the case of the assessee. The assessee is not supposed to confess that his return, as filed, is not true or correct or that he had concealed material facts or has made untrue statements, and invite rejection from the Income-tax Officer. In the case of Sarogi Credit Corporation [1976] 103 ITR 344 (Patna), while interpreting the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the present case, in my opinion, bear close resemblance with those of Madnani Engineering Works Ltd. [1979] 118 ITR 1 (SC), Basantaram Kedarnath [1987] 165 ITR 777 (Cal) and Sarogi Credit Corporation [1976] 103 ITR 344 (Patna). The petitioner had disclosed the names of the creditors and produced documents in support of its claim of taking loan from them. There is nothing on record to show that the creditors did not stand by the case of the petitioner. In fact, even at the stage of proposed reassessment proceedings, pursuant to notice they appeared and vouchsafed the correctness of the petitioner's case. The finding of the Assessing Officer, to the effect that their "creditworthiness" was doubtful pertains to his "opinion" with respect to the same transaction and on the basis of the very same materials. The petitioner, it can be said in view of the decision in Sarogi Credit Corporation [1976] 103 ITR 344 (Patna) had discharged the onus and it was for the Assessing Officer to investigate the correctness or otherwise of the petitioner's case, to accept or reject the same at the time of original assessment. Merely because the Assessing Officer now seems to doubt the "creditw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without disclosing any reasons or grounds set aside the order of the Bombay High Court observing that it appears that facts had subsequently come to the notice of the Income-tax Department that the facts disclosed in the return were not true and correct declaration of facts. I have looked into the decision of the Bombay High Court in VIP Industries Ltd. v. IAC [1991] 187 ITR 639, giving rise to the aforesaid case in the Supreme Court, from which it appears that the reassessment proceedings were sought to be initiated under section 147(a) of the Act on the ground that payment of commission allegedly made to the agent was bogus and that the purchases were also partly bogus. The Bombay High Court quashed the notice holding that when the Income-tax Officer concluded the assessment the necessary materials were before him. As stated above, the Supreme Court without disclosing reasons or grounds by a short order set aside the order of the High Court and remanded the case to the Income-tax Officer for decision in accordance with law. Inasmuch as the order of the Supreme Court does not set out reasons or grounds, it must be held that the order was passed, in the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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