TMI Blog2008 (8) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ircle VI(4), Chennai-34, under Section 148 of the Income Tax Act (for short, 'the Act'), whereby, the second respondent decided to assess/ reassess the income/recompute the loss/depreciation allowance for the assessment year 2000-2001, on the ground that the income of the Company which was assessed as being chargeable to tax, escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 (for short, 'the Act'). 3. Having upheld the said notice dated 27.3.2007 and the letter dated 17.7.2007 passed by the first respondent-Assistant Commissioner of Income Tax, Company Circle VI(4), Chennai-34, whereunder the reasons for reopening the income of the Company for the assessment year 2000-2001, have been set out, the learned single Judge dismissed the Writ Petition in question, giving rise to the present Writ Appeal by the Company. 4. The assessment of the income of the Company, relates to the assessment year 2000-2001, for which, notice dated 27.3.2007, under section 148 of the Act, was issued by the second respondent-Deputy Commissioner of I.T to assess/reassess the income, which escaped assessment within the meaning of Section 147 of the Act, after the expi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment by reasons of omission or failure on the part of the Company to disclose all material particulars. 9. According to the learned Senior Counsel appearing for the Company, the belief of the Assessing Officer cannot be substituted by the belief formed by the Commissioner/Chief Commissioner of Income Tax or even by a Court of law/statutory forum. The Commissioner of Income-Tax has to either sanction or reject the case of the assessee for reopening/reassessment of the income, on the basis of the reasons recorded by the Assessing Officer, if it was found that the Assessing Officer has reported that it is a fit case for re-assessment/reopening of the income of the assessee. The Assessing Officer cannot start a roving/fishing investigation by issuing the said notice under section 148 of the Act and the said provision cannot be treated as a cloak for starting a roving/fishing investigation. 10. The other submission of the learned Senior Counsel appearing for the Company is that the Assessing Officer, before issuance of the notice, must record the reasons for doing so, as the proviso to Section 151(1) of the Income Tax Act, makes it mandatory that after the expiry of four year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income has not escaped the assessment by reason of any omission or failure on the part of the Company to disclose fully and truly all material facts. 14. Learned Standing Counsel appearing for the respondents-Revenue, referring to the list of events, submitted that the notice under section 148 of the Act was issued on 27.3.2007 calling the appellant-Company for filing the 'return' and in response to the same, the Company replied on 5.4.2007 that the 'return' filed on 31.10.2001 may be treated as the 'return' filed pursuant to the notice dated 27.3.2007 and the Company further sought for the reasons for reopening/reassessing the assessment of the income of the Company. 15. It is also informed on behalf of the respondents-Revenue that the learned single Judge directed to specifically inform as to whether there was any approval/sanction under section 151 of the Act and to submit the copies of the documents which were instrumental in initiating the reassessment proceedings and also to mention the assessment year, and the Company was directed to attend the case on the date of hearing and therefore, their representative attended the hearing. The letter dated 31.8.2007 containin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer stumbles on materials indicating that the returns were not true as is claimed. An opportunity is given for making a clean breast of affairs, and one need not be apprehensive unless he has skeletons in his cupboard." 19. Learned Standing Counsel appearing for the Revenue also relied upon the decision of the Supreme Court reported in Phool Chand Bajrang Lal vs. I.T.O [1993] 203 ITR 456, wherein the Supreme Court held as follows (at page 478 of 203 ITR) : "One of the purposes of Section 147 appears to us to be to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when the falsity comes to notice, to turn around and say "you accepted my lie, now your hands are tied and you can do nothing". It would be a travesty of justice to allow the assessee that latitude." 20. We have heard the learned counsel appearing for the parties and noticed their rival contentions. 21. The question required for determination in this case is as to whether the assessing officer while issuing notice under section 148 of the Act, was satisfied with the conditions that : (i) he had reason to believe that any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal 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 claimed excessive loss, deduction, allowance or relief in the return ; (c) 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." 23. Similar question fell for consideration before a Constitution Bench (Five-Judges) of the Supreme Court reported in Calcutta Discount Co. Ltd. vs. Income Tax Officer [1961] 41 ITR 191 and in the said case, the notice under Section 34 of the Income Tax Act (XI of 1922), which is similar to notice under Section 147 of the Income Tax Act, 1961, was challenged on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Board of Revenue must have been satisfied on those reasons that it is a fit case for the issue of the notice. The recording of the reasons in support of the belief formed by the Income-tax Officer and the satisfaction of the Central Board of Revenue on the basis of the reasons recorded by the Income-tax Officer that it is a fit case for issue of notice under section 34(1)(a) are extremely important circumstances to find out whether the Income-tax Officer had jurisdiction to proceed under section 34(1)(a)." 26. In the decision of this Court reported in Fenner (India) Ltd. vs. Deputy. C.I.T , [2000] (241) I.T.R. 672 (it was held that if the notice has been issued after the expiry of four years, the Income Tax Officer not only has to form the belief that income has escaped assessment, but also has to form the belief that income has escaped assessment by reason of any omission or failure committed by the assessee and failure to do so, would vitiate the notice and the entire proceedings. 27. The same view has been taken by a Division Bench of Bombay High Court in the decision reported in Ajanta Pharma Ltd. vs. Asst. C.I.T. [2004] 267 ITR 200 (Bom.). 28. The present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pertain to 1996 to 2001." 4. As per the information thus received from the Enforcement Directorate it appears that there is every chance of booking inflated expenditure on account of import. But the transactions relate to the Financial Year 1992 onwards. Even though, no action is possible for the Asst. Years upto the Assessment Year 1999-2000, action can be initiated under section 147 for Asst. Year 2000-01. 5. On verification of the Assessment Order for Asst. Year 2000-01 it is seen that this issue had not been considered in the Assessment. 6. In the absence of necessary details from the Enforcement Directorate the amount of concealment, if any, and income that has escaped assessment cannot be quantified. On the basis of the information available, it appears that the tax effect will be more than Rs.1 lakh. 7. Further investigation can be done only if the assessment is reopened under section 147. However, such reopening is to be done before 31.03.2007, since the period of six years from Asst. Year 2000-01 elapse by this date. 8. Since an assessment had already been completed under section 143(3) and also since four years have elapsed from the end of the relevant Asst. Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to income tax, have been under-assessed and (ii) whether the Assessing Officer have also a reason to believe that such under-assessment has occurred by reason of either : (a) omission or failure on the part of the assessee to make a return of his income or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the year. 33. From the letter dated 16.3.2007 as quoted above, it is clear that the assessing officer had noticed the following facts : (i) The assessee had given some orders for import, but they failed to produce the original Bills of Entry. (ii) So far as the belief of the assessing officer that the income, profits and gains chargeable to income, have been under-assessed, is concerned, no specific finding has been given, except a doubt has been raised, by stating that, "As per the information thus received from the Enforcement Directorate it appears that there is every chance of booking inflated expenditure on account of import" (emphasis supplied). In the said letter, nowhere it has been mentioned that (i) the income of the assessee had been under-assessed and (ii) such under-asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 35. The Revenue had taken one of the grounds that the appellant-Company had submitted before the Revenue regarding the income escaping reassessment and therefore, should not have moved before this Court. But such submission cannot be accepted, as from the records, it appears that the Company, by its letter dated 16.8.2007, while acknowledging the notice, sought for certain records and by the said letter dated 16.8.2007, the Company objected for reopening of the assessment, but the notice under Section 148 of the Act having not been withdrawn by the Revenue, the Company had to move before this Court. 36. Though the aforesaid facts seem to have been brought to the notice of the learned single Judge, it appears that the learned single Judge, without discussing the question(s) of law, refused to grant the relief prayed for in the Writ Petition in question, merely on the basis of the allegations as made by the Revenue and highlighted before the learned single Judge. In this regard, we have already mentioned that this Court is not supposed to satisfy itself as to whether the income, profits or gains chargeable to income tax, have been under-assessed or such under-assessment ..... 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