TMI Blog1994 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ice under section 148 read with section 147 of the Income-tax Act for the year 1983-84 (annexure-3 in C.W.J.C. No. 7512 of 1992) is dated March 21, 1991. Similar notice for the year 1984-85 (annexure-3 in C. W. J. C. No. 7511 of 1992) is dated March 26, 1992, and for the year 1985-86 the notice is dated March 26, 1992 (annexure-3 in C. W. J. C. No. 7510 of 1992). Substantially similar are the facts stated and dealt with by the petitioner and by the respondent/Revenue in the writ petition, in the counteraffidavits and in the rejoinder affidavits in all the three cases. C. W. J. C. No. 7512 of 1992 relating to the earliest assessment year 1983-84 was taken as the representative case and it was agreed at the Bar that the pleadings in the case may be taken as the basis for all the three years. Both sides proceeded on that basis. In appreciating the pleas raised before us, we have to bear in mind that the provisions of sections 147, 148 and 151 of the Income-tax Act, as they stood prior to the substitution of those sections by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, are the relevant statutory provisions governing the matter. For appreciating the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der this section, record his reasons for doing so. . . . 151. Sanction for issue of notice.--(1) No notice shall be issued under section 148 after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. (2) No notice shall be issued under section 148 after the expiry of four years from the end of the relevant assessment year, unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. " The petitioner-firm carries on contract business. According to it, it has maintained necessary books of account in the regular course of business and is being assessed to tax as a registered firm under the Income-tax Act. The further case pleaded is that for the accounting periods relevant for the assessment years 1983-84, 1984-85 and 1985-86, the petitioner has maintained necessary books of account in the regular course of business. The petitioner filed returns for the aforesaid years and, after discussion with the Commissioner of Income-tax, filed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saged by the Act are totally absent in this case. In paragraph 12 of the writ petition, the petitioner has stated as follows : " That the petitioner states that admittedly for the assessment year 1983-84 return was duly filed. It is also on record that all the material facts necessary for his assessment were also duly disclosed in the documents accompanying the return, viz., the audited trading and profit and loss account, balance-sheet, details of loan accounts giving also their income-tax file numbers thereon, etc. After due consideration of these material on record, the assessment was completed on March 30, 1987 (annexure-2). It is thus, plain that there was neither any failure on the part of the assessee nor there was any new information available on the record, within the meaning of section 147 of the Act. The issue of the notice under section 148 read with section 147, is thus wholly arbitrary and without jurisdiction, and is solely for the purposes of making roving and fishing enquiries, which it is well-settled, is not permissible thereunder. It may further be stressed here that all the loans have been received by account payee cheques. Even the repayment of the loans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted against the following names were appearing : Rs. 1. Jain Transport Organisation 1,04,072 2. Khub Chand Nem Chand 1,04,072 3. Glob Iron 2,07,903 4. Nand Lal Mul Chand 1,04,072 5. Max Worth Industrial Service 2,07,258 6. Delux Enterprises 1,55,444 7. Cresent Enterprises Ltd. 51,754 ---------------- 9,34,575 ---------------- During the course of assessment for the assessment year 1987-88, enquiries were carried out by the Investigation Wing of Calcutta. The result of the enquiries is reported party-wise as under : 1. Jain Transport Organisation No such business concern was found at the given address. 2. Khub Chand Nem Chand Party was not found at the given address. 3. Glob Iron Party was not found at the address. 4. Nand Lal Mul Chand Could not confirm the loans. 5. Max Worth Industrial Service Party was not found at the address given. 6. Delux Enterprises Not found at the address given. 7. Cresent Enterprises Ltd. The company was never at the address given. The Assessing Officer, in view of the above facts and after considering the reply of the petitioner dated September 5, 1990, came to the conclusion that the income of the petitioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 and for obtaining the approval of the Commissioner of Income-tax. Therein the officer has stated against columns 6, 7 and 12 thus : " 6. The quantum of income Rs. 9,34,575 cash credits which has escaped assessment. 7. Whether the provisions of section 147 of the Income-tax Act, 1961 147(a) or 147(b) are applicable or both the sections are applicable. 12. Whether the Commissioner/Board Yes. I am satisfied." is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of a notice under section 148. The petitioner has filed a detailed rejoinder dated May 20, 1992. In paragraph 10, the petitioner has specifically stated that all the loans received by the assessee were by account payee drafts, interest was paid from time to time by account payee cheques/drafts, the principal amounts were repaid by account payee drafts, that all the creditors are income-tax assessees who have duly confirmed the transactions in question furnishing therein also their income-tax file numbers. In paragraphs 11 to 17, the petitioner has attempted to show that no proper enquiry was conducted to surmise that either the parties from whom the loans were obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was also entered in December, 1982, while the enquiry was made in July, 1989. The enquiry further supports the fact that the party was not only in existence at the relevant point of time but was even in existence till March, 1988. The facts in this case are identical with the case of Khub Chand Nem Chand as stated in paragraph 12 above. 14. That with regard to the credit in the name of Nand Lal Mulchand it has been alleged that the said party could not confirm the loan. This is clearly a misstatement inasmuch as even in the assessment year 1987-88 interest paid to this party has been allowed and not disallowed. Moreover, from the mere fact that the said party could not confirm the loan, the non-existence of the party cannot be inferred. On the contrary, it establishes the existence of the party. In fact, the said party had confirmed the loan directly to the Assessing Officer and it is on that count that the interest paid to this party was duly allowed in the assessment year 1987-88. 15. That with regard to the credit in the account of Max Worth Industrial Services Ltd. the credits in this account are in January, 1983, by bank drafts, while the enquiries have been conducted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have confirmed on affidavit the genuineness of the said transactions." We heard counsel for the petitioner, senior advocate, Mr. Jain, as also counsel for the Revenue. A few relevant dates and aspects deserve notice : 1. The Income-tax Officer issued the show-cause notice to the assessee 7-8-1990 (annexure-A) 2. Objections filed by the assessee 5-9-1990 (annexure-B) 3. Notice under section 147 issued to the assessee 21-3-1991 (served on the assessee on 25-3-1991). 4. Appellate order for the year 1987-88 10-8-1992 5. Writ application filed 10-8-1992. In the writ petitions, the notices issued under section 148 read with section 147 of the Income-tax Act for the assessment years 1983-84, 1984 85 and 1985-86 are assailed in C. W. J. C. Nos. 7512, 7511 and 7510 of 1992, respectively. It is common ground that the notices under section 148 read with section 147 of the Act were issued more than four years after the end of the assessment years. It is also common ground that section 147(a) of the Income-tax Act, 1961, as it stood at the relevant time, is applicable in this batch of three cases. A perusal of sections 147, 148 and 151 of the Act, would go to show that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts ; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is a capital receipt, or a revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and, taking all these together, to decide what the legal inference should be." The above passage was quoted with approval in the subsequent decision in Burlap Dealers Ltd.'s case [1971] 79 ITR 609 (SC). It was held therein that the assessee's duty was to disclose (primary) material facts and the assessee had no duty to inform the officer all probable inferences that may be raised on the facts disclosed. If the officer made wrong inferences in the original assessment, he was not entitled to reopen the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a true and full disclosure of the material facts, by not confessing before the Income-tax Officer that the documents were bogus. In CIT v. Agarwalla Brothers [1991] 189 ITR 786, a Division Bench of this court held that for determining the validity of the notice issued under section 147 of the Act, only the reasons recorded at the time of issuing the notice can be considered. Only those reasons recorded under section 147 of the Act can be looked into for determining the validity of the notice. Relying on the above decisions of the Supreme Court and the decision of this court and the averments contained in paragraph 12 of the writ petition and paragraphs 11 to 17 of the rejoinder, quoted hereinabove, the assessee's counsel contended that the issue of notices in this case to reopen the assessments under section 147 read with section 148 of the Income-tax Act is totally illegal and without jurisdiction. On the other hand, counsel for the Revenue contended that during the course of the assessment of the same assessee, for a subsequent year (1987-88), enquiry was carried out by the Investigation Wing of Calcutta and it was found that the seven creditors from whom the assessee is said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s necessary for the purpose of its assessments for the concerned assessment years. All that the Revenue has stated in the counteraffidavit is that during the course of assessment proceedings in the subsequent assessment year 1987-88, an enquiry was carried out and the investigation revealed that the seven creditors from whom the assessee had obtained loans were found non-existent. In particular, reliance was placed on the show-cause notice dated August 7, 1990 (annexure-A to counter-affidavit). Neither the counter-affidavit nor the show-cause notice (annexure-A) nor the recording of reasons (annexure-C) in any way point out that there was any failure on the part of the assessee to disclose truly or fully primary or material facts necessary for the purpose of its assessments for the relevant assessment years. There was no omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessments of those assessment years. This is not a case where the assessee failed to make a return under section 139 of the Act for the relevant assessment years. In these circumstances, I hold that the Assessing Officer could not (and did not) hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed the Income-tax Officer of the assessee in a different place that the managing director of the Calcutta company had made a confession to the effect that the company was only a name-lender and had never advanced any loan to any person and this was accepted in the assessments of the (Calcutta) company. On this basis, the Income-tax Officer issued a notice under section 147(a) of the Act. In the said background, and in considering Burlop Dealers Ltd.'s case [1971] 79 ITR 609 (SC), at page 472, the Supreme Court held thus : " Thus, it is seen that in Burlap Dealers' case [1971] 79 ITR 609 (SC), apart from the Income-tax Officer holding during the assessment proceedings of the same assessee for a subsequent year, that the alleged agreement between the assessee and Ratiram was bogus, there was no other information or material from any other external source which came to the notice of the Income-tax Officer after the assessment proceedings which could enable the Income-tax Officer to form a reasonable belief that the income of the assessee had escaped assessment in the earlier year. As a matter of fact, after the conclusion of the original assessment proceedings, there was no fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved in order to initiate proceedings under the said sections. If the prerequisites envisaged by the said sections are absent, the Income-tax Officer cannot assume jurisdiction to initiate proceedings under section 147 of the Act. The question pertains to jurisdiction and is fundamental. There is total want of jurisdiction. In such circumstances, I am of the view that the availability of an alternative remedy, by way of appeals and reference which are likely to be lengthy proceedings, cannot be said to be an equally efficacious remedy. The availability of an alternate remedy is no bar and this court can issue appropriate writs to afford effective and meaningful relief to the assessee. I further hold that this is not a case wherein section 150 of the Income-tax Act will apply and reliance placed on the appellate order (annexureC) filed along with the petition by the Revenue has no relevance. The appellate order is dated August 10, 1992, and related to the assessee's case for the year 1987-88. It cannot be said that the earlier notice dated March 21, 1991, was issued by the Income-tax Officer, in these three cases in order to give effect to the observations contained in the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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