TMI Blog2009 (8) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... R.K. Agrawal, J. and Hon'ble Shashi Kant Gupta, J. Petitioner's Counsels - Akhilesh Kumar and Rishi Raj Kapoor Respondent's Counsel - S.C. , A. Kumar , A.N. Mahajan , Bharatji Agarwal , D. Awasthi , G. Krishna and S. Chopra JUDGMENT The judgment of the court was delivered by S. K. Gupta, J. - Writ petition no. 32 of 2005 has been filed interalia for the following reliefs:- "(i) That a suitable writ, order or direction be issued quashing the notices dated 15.12.2003, for reassessment under Section 147 of Income Tax Act, 1961 for the assessment years 2001-02 and 2002-03, both under Section 148 of Income Tax Act, 1961; (ii) That a suitable writ, order or direction in the nature of mandamus or prohibition be issued restraining or prohibiting the Income Tax Officer, Ghaziabad, respondent from passing any reassessment order in pursuance of the notices dated 15.12.2003 both under the Income Tax Act, 1961; 2. Writ petition no. 31 of 2005 has been filed interalia for the following relief:- "(i) That a suitable writ, order or direction be issued quashing the notices dated 8.1.2004, for reassessment under Section 147 of Income Tax Act, 1961 for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 9. On the request of the petitioner, reasons for issuance of notices under Section 148 for the assessment year 2001-02 and 2002-03 were supplied in the end of February, 2004. For ready reference, reasons for issuance of notice under Section 148 of the Act as supplied by the respondent for the assessment year 2001-02 is quoted below:- "M/s Desh Raj Udhyog, Site-3 C-19, Meerut Road Industrial Area, Ghaziabad for Assessment Year 2002-03. Reasons for issue of notice U/s 148 On perusal of the P L A/c in the above mentioned case for A.Y. 2001-02, it reveals that the assessee firm has credited misc. receipt as rent from property amounting to Rs. 8,83,080/- and sales of Rs. 30,82,001/- and gross profit of Rs. 6,28,459/- only and debited business expenditure to the tune of Rs. 11,20,413/- giving a net profit of Rs. 3,91,158/- which is less than the rent received. Which shows that assessee has claimed excessive business expenditure with the motive to reduce the taxable property income. Thus the assessee is entitled to get the benefit of deduction as allowable under the head income from house property and not as business expenditure as claimed by the assessee in the P L A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention which will be discussed in the latter part of the judgment. 13. In contra, learned counsel for the Revenue submitted that the notices issued under Section 148 of the Act is in accordance with law and the Assessing Authority had validly exercised its jurisdiction to reopen the assessment. 14. Heard learned counsel for the parties and perused the record. 15. It is not disputed that the returns filed for the assessment year 2001-02 and 2002-03 were accepted under Section 143 (1) which indicate that mind was not applied by the Assessing Authority and after accepting the return in the routine manner the intimation was sent to the petitioners as provided under Section 143 (1) of the Act. Since the returns were accepted and the intimation was issued under Section 143 (1) of the Act to the petitioner as such when no opinion was formed by the Assessing Authority, therefore, there is no question of change of opinion. 16. In this regard, it will be useful to refer to aforesaid circular No. 549 dated 31st October, 1989. The relevant ex293tract of the said circular is reproduced below:- "Income escaping assessment 7.1 Simplification of the provisions relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and debitted business expenditure to the tune of Rs. 11,20,413/- giving a net profit of Rs. 3,91,158/- which was less than the rent, received. According to the Assessing Officer, assessee had claimed excessive business expenditure with the motive to reduce the taxable property income. The Assessing Officer was further of the view that the assessee was entitled to get the benefit of deduction as allowable under the head income from house property and not as business expenditure as claimed by the assessee in the profit and loss account. The Assessing Officer had placed reliance on the order dated 29.7.2003 passed by CIT (A) , Ghaziabad in the case of the petitioner in the assessment year 2000-01 and also placed reliance upon the decision of the Apex Court in the case of East India Housing and Land Development Trust Ltd. V. CIT, W.B. 42 ITR page 49. 19. Further reasons assigned by the Assessing Officers were that the interest paid to the persons is not entirely on account of business activity but the major part of the capital was invested towards the purchase of the property thus the investment made by those persons, the so called partners and no interest can be allowed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee but no assessment has been made and it is noticed by the Assessing Officer, that the assessee has understand 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. Here in the present case in fact no assessment order under Section 143 (3) was passed and simply the returns for the assessment years 2001-02 and 2002-03 were accepted without application of mind and the intimation was sent to the petitioners. It is also relevant to note that for the assessment year 2000-01, the CIT(A) Ghaziabad initially by order dated 22.7.2003 before the issuance of impugned notices under Section 148 had dismissed the appeal of the petitioner and held that the petitioner was not entitled for set off the business expenditure claimed to the extent of Rs. 4,72,256/- against the income from property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm concern in Etawah, and managed by Sri Om Prasad Purwar, fraudulently and without the consent of the petitioner started an account in the books of his firm styled as J.P. Bajpai, Hindu undivided family, Etawah. The aforesaid amount allegedly shown deposited in the books of M/s Atul Traders fraudulently and with nefarious design had illegally shown the bogus deposit in the name of the petitioner on the liability side of its balance-sheet. The Assessing Authority while passing the assessment order in the case of M/s Atul Traders treated the deposit as bogus and the entire amount along with interest was added in the hands of the firm, M/s Atul Traders, Etawah. Despite the aforesaid fact the Assessing Authority issued notice under Section 147 of the Act to J.P. Bajpai HUF as well as to M/s Atul Traders. 28. Thus, it is obvious that in the case of J.P. Bajpai (HUF) the impugned notice under Section 148 was issued only on the basis of a change of opinion on the part of the Assessing Officer, consequently the impugned notices were quashed. 29. The aforesaid facts and circumstances of the case of J.P. Bajpai (HUF) clearly suggest that the present case is clearly distinguisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income, it is a case where the said part of the income has escaped assessment. The appellant's attempt to put a very narrow and artificial limitation on the meaning of the word 'escape' in section 34 (1) (b) cannot therefore, succeed." (emphasis supplied)" 34. The Apex Court in the case of Commissioner of Sales Tax, U.P. Vs. Bhagwan Industries (p) Ltd., AIR 1973 SC 370 in a case arising out of Section 21 of the U.P. Trade Tax Act which related to the escaped assessment, has held as follows:- "9. The controversy between the parties has centred on the point as to whether the assessing authority in the present case had reason to believe that any part of the turnover of the respondent had escaped assessment to tax for the assessment year 12957-58. Question in the circumstances arises as to what is the import of the words" reason to believe, as used in the section. In our opinion, these words convey that there must be some rational basis for the assessing authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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