TMI Blog2009 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ner Counsel :- Rakesh Ranjan Agrawal,Suyash Agarwal Respondent Counsel :- C.S.C. JUDGMENT The judgment of the court was delivered by Prakash Krishna, J. - These five writ petitions relating to the five assessment years 1997-98 to 2001-02 of the Income Tax Act, challenging the legality and validity of the notice issued under Section 148 of the Income Tax Act (hereinafter referred to as the Act) were heard together and are being disposed of by a common judgment as the common questions of law and facts are involved therein. The arguments were advanced in the writ petition no. 922 of 2004 relating to the assessment year 2000-01. The facts, as jointly suggested by the learned counsel for the parties, are being noticed from the said writ petition, hereinbelow. The petitioner, a partnership firm is engaged in the business of trading in jewellery, import of golds, bullion, kirana goods like clove, Dalchini, Gambier, shoe-lining, marble and its sale in the local market, and also in export of gold jewellery. Income tax returns were filed in respect of the aforestated five assessment years and they were processed under Section 143(1) of the Act for the assessment years 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ravi Kant, learned Senior Counsel along with Sri Rakesh Ranjan Agrawal, Advocate has urged only the following two points for consideration of this Court. (1) The assessee had disclosed all the material facts before the assessing officer during the course of assessment proceedings. The assessment orders were framed on the basis of those materials and no new evidence has come in possession of the department and as such, the reassessment notice, impugned in the present petition, is based on mere 'change of opinion' and as such, the proceedings are wholly without jurisdiction. (2) Re-assessment proceeding under Section 147 of the Act is not permissible in respect of 'block assessment'. Elaborating the arguments, it was submitted that the period relating to the assessment years 1997-98, 1998-99 and 1999-2000 was covered under 'block assessment order', being for block period 1-4-1989 to 3-2-2000. In other words, the submission is that where a 'block assessment order' has been passed, the law does not envisage initiation of reassessment proceedings by taking recourse to Sections 147 and 148 of the Act. Along with supplementary affidavit filed with application dated 25-5-2009, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o concealment on the part of the petitioner and the claim was thoroughly examined while framing the assessment order. The very initiation of the proceedings under Sections 147 and 148 of the Act is totally without jurisdiction. Reliance was placed on certain decisions which will be noticed in the latter part of the judgment. The phrase 'reason to believe' as used under Section 147 of the Act are key words for reopening an assessment. The said phrase has been subject matter of interpretation, time and again. Under Section 147 of the Act, the proceedings for the assessment can be initiated only if the Assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The question whether the Assessing Officer had reasons to believe is not a question of limitation only but is a question of jurisdiction, a vital thing, which can always be investigated by the Court in an application under Article 226 of the Constitution as held in Daulatram Rawatmal v. ITO (1960) 38 ITR 301 (Cal); Jamna Lal Kabra v. ITO, (1968)69 ITR 461(All) ; Calcutta Discount Co.Ltd. v. ITO , (1961) 41 ITR 191 (SC); C.M. Rajgharia v. ITO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee from assessment in the particular year. It is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of income of the assessee from assessment. as held by the Hon'ble Supreme Court in the Case of I.TO v. Lakhmani Mewal Das (1976) 103 ITR 437. If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonable entertain the belief, the conclusion would be inescapable that the Assessing officer could not have reason to belief. In such a case, the notice issued by him would be liable to be struck down as invalid as held in the case of Ganga Saran Sons P. Ltd v. ITO, (1981)130 ITR 1(SC). Thus, it is well settled that the ''reason to believe' under Section 147 must be held in good faith and should have a rational connection and relevant bearing on the formation of the belief and should not be extraneous or irrelevant. Further this Court in proceedings under Article 226 of the Constitution of India can scrutinize the reasons recorded by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old has been consumed. B. 47102 gms of gold jewellery has been exported. This gold of 43000 gms is the raw material for manufacturing of 47102 gms. of gold jewellery and the difference in weight of 4102 gms. is on account of addition in weight during the manufacturing process. Thus, it is very clear that the assessee is a manufacturer of gold jewellery as in his own replies to queries raised during various assessment years, he has admitted both purchase of gold and manufacture of jewellery as well as payment of making charges. However in the computation of 80HHC the assessee has computed the deduction on the formula specified U/s 80 HHC (3)(b) where the export out of India is of trading goods where as it should claim the above deduction on the formula specified U/s 80HHC (3)(a) for export out of India for goods and merchandise manufactured or processed by the assessee. x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x Accordingly, it is noted that the assessee has claimed a deduction of Rs. 13,20,894/- U/s 80 HHC instead of claiming only Rs. 35,554.23, thereby reducing his income. Further the assessee has also not included the effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. For the reasons aforementioned, we are of the opinion that the answer to the question raised before this Bench must be rendered in the affirmative, i.e. in favour of the assessee and against the Revenue. No order as to costs." Section 147 of the Act provides for income escaping assessment. The said Section was substituted w.e.f. 1-4-1988. The amended Section 147 contains two Explanations. Explanation 2, which is relevant for our purposes, is reproduced below:- "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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. It is well-settled that sufficiency of material to form reason to believe cannot be the the subject-matter of the writ jurisdiction. The High Court in the exercise of its jurisdiction under article 226 of the Constitution of India can interfere in a writ petition against a notice issued under section 148 of the Act when it is of the opinion that there is no material in possession of the assessing authority on which reasonably an opinion can be formed that the income has escaped assessment. Keeping this principle of law in mind, we have considered the submissions of learned senior counsel for the petitioner and find that although the assessment of the petitioner was completed under section 143 (3) of the Act. But there is no discussion in the assessment order about the income earned by the assessee from the sale of shares by way of long-term capital gains. The entire assessment order is confined to the question relating to investment in the construction of house. Explanation 2 to section 147 enumerates the cases where it shall be deemed that income chargeable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as noticed hereinabove, that since the facts were disclosed before the assessing authority and the assessment was completed under Section 143(3) of the Act, the proceedings under Section 147 of the Act could not have been initiated, has got no merit. Whether the petitioner is a 'manufacturer' or 'trader' is a question which was required to be looked into and examined by the assessing officer at the time of original assessments, which it failed. It will not be out of place to mention here that we were taken to the assessment order relating to the assessment year 2000-01 and it was tried to impress upon us that the question whether the petitioner is a 'trader' or 'manufacturer' was considered in the assessment order but we find no such discussion therein. Needless to say anything further as it may prejudice the case of the petitioner. Following decisions, which were relied upon by the learned Senior Counsel for the petitioner, may be noticed, to keep the record straight:- (1) In M/S Radhasoami Satsang, Agra Vs. Commissioner of Income Tax, 1992 UPTC 96 it has been held that principle of res judicata is not applicable to Income Tax proceedings. In the absence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arti Handa ACIT and others, (2008) 300 ITR 283 (Bom). 3. Smt. Jameela Ansari Vs. Income Tax Department another, (1997) 225 ITR 490 (Allahabad). 4. SGS India Pvt. Ltd. Vs. ACIT Another, (2007) 292 ITR 93 (Bom). 5. Siemens Information Systems Ltd. Vs. ACIT others, (2007) 295 ITR 333 (Bom). 6. Kaira District Cooperative Milk Producers Union Ltd. Vs. ACIT, (1996) 220 ITR 194 (Guj). 7. CIT Vs. Pithampur Steels Pvt. Ltd. (2008)173 Taxman 190 (MP). 8. Ambica Steels Pvt. Ltd. others Vs. State of U.P. 2008 UPTC 455. 9. Cargo Clearing Agency Vs. JCIT, (2008)307 ITR 1 (Guj). In view of the above discussions, we find no merit in the first submission of the learned Senior Counsel for the petitioner and the same is hereby rejected by holding that initiation of reassessment proceedings, on the facts of the present case, cannot be said to be without jurisdiction. By way of clarification, it may be added that the plea that the initiation of reassessment proceedings are barred by time was not argued or raised before us. It may also be added that in the writ petition it has been pleaded that the reasons to initiate reassessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king note of Explanation to sub-section (2) of Section 158 BA, which reads as follows:- "Explanation- For the removal of doubts, it is hereby declared that- (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period." has held as follows:- "..........................After the insertion of explanation to sub-section (2) of Section 158BA of the Act, the Parliament has made its intention clear that the special procedure for making assessment of undisclosed income as a result of search and specified matters as provided under Chapter XIVB is confined to the undisclosed material found therein and does not in any way effect the regular assessment provided under Chapter XIV of the Act in respect of the income not discovered or relatable to the search under Section 132 or the requisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment has been made by giving excessive relief under section 80 HHC of the Act. Section 80 HHC provides scheme for deduction in respect of profits retained for export business and sub-section 3(a), 3(b) and 3(c) give the details claiming deductions by various categories of exporters. The petitioner has been claiming the same in the category of 'trader exporter' and computed deductions as per sub-section 3(b). The case of the department is that the petitioner falls in the category of 'manufacturer exporter' and correct computation should be made according to sub-section 3(a). The issue whether the petitioner is entitled for deduction as a 'trader exporter' or a 'manufacturer exporter' having not been addressed in the block assessment order even, it is a clear case of initiation of reassessment proceedings. In view of the Explanation, referred to above, which declares that the assessment made under Chapter XIVB dealing with special procedure for assessment, such cases shall be in addition to the regular assessment in respect of each previous years included in the block period. We do not find any merit in issue no.2 also. Viewed as above, we do not find any illegality in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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