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2005 DIGILAW 1152 (RAJ)

Kharta Ram Choudhary v. Union of India

2005-04-19

GOVIND MATHUR

body2005
Judgment Govind Mathur, J.-This petition for writ under Article 226 of the Constitution of India for quashing the notice dated 26.03.1992 issued by the Income Tax Officer, Barmer (hereinafter referred to as "the ITO, Barmer") under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as "the Act of 1961") and for direction restraining the said ITO from taking further proceedings pursuant to the notice above. 2. The facts necessary to be noticed are that the ITO, Barmer made an assessment in the case of the petitioner for assessment year 1988-89 under Section 143(3) of the Act of 1961 on 212.1989 for total income of Rs. 2,38,320/-. 3. The Commissioner of Income Tax, Jodhpur issued a notice dated 15/16.01.1992 which was received by the petitioner on 29.01.1992 for initiating proceedings under Section 263 of the Act of 1961. In response to the notice dated 15/16/01.1992 the petitioner submitted an explanation by way of filing a representation dated 29.01.1992. The Commissioner of Income Tax, Jodhpur by order dated 25.02.1992 dropped the proceedings initiated vide notice dated 15/16.01.1992. 4. The petitioner was served with a notice dated 26.03.1992 under Section 148 of the Act of 1961 issued by the ITO, Barmer to reassess income of the petitioner for the assessment year 1988-89 being having reason to believe that the income chargeable to tax has escaped assessment. The petitioner on receiving the notice dated 28.04.1992 submitted a return declaring income of Rs. 65,180/-. The return was submitted by the petitioner with protest as according to him the notice was illegal and uncalled for. The note of protest was given by the petitioner to ITO, Barmer on 28.04.1992. 5. The petitioner immediately after submitting return and the note of protest preferred the present petition before this Court on 30.04.1992, giving a challenge to the notice dated 26.03.1992 on the ground that no reason was recorded by the ITO for impugned reopening or atleast no such reason was communicated despite requests, no notice under Section 148 for making reassessment under Section 147 of the Act of 1961 could have been issued by the ITO as the assessment for the year 1988-89 was considered by the Commissioner of Income Tax by issuing a notice to initiate proceedings under Section 263 of the Act of 1961 and after getting himself satisfied proceedings sought to be initiated under Section 263 were dropped. It is also stated in the petition that the assessment for the year 1988-89 was an agreed assessment and the said agreement binds the department also, as such the principles of promissory estoppal estopes the ITO, Barmer from initiating proceedings under Section 147 of the Act of 1961. .6. A counter to the writ petition has been filed on behalf of the respondents contending therein that the notice under Section 148 of the Act of 1961 was issued by the Assessing Officer only after being satisfied with reasons to believe that the income chargeable for tax for the assessment year 1988-89 was escaped. Such reasons were recorded by the Assessing Officer before issuing the impugned notice. It is also pointed out by the Counsel for the respondents that in pursuance to the order dated 19.03.2001 passed by this Court the reasons recorded by the ITO, Barmer were also supplied to the petitioner. The respondents denied the fact averred in the petition to the effect that the assessment for the year 1988-89 was an agreed assessment. 7. In rejoinder to the reply the petitioner reiterated the facts stated in the petition. 8. I have heard Counsel for the parties. 9. The grounds to challenge the notice impugned in present petition are (1) before issuing a notice under Section 148 of the Act of 1961 for reopening of an assessment already made the Assessing Officer must record and communicate the reasons to believe income chargeable to tax escaped assessment for any assessment year, no such reasons were recorded, communicated and supplied to the petitioner by the ITO, Barmer, the Assessing Officer, hence the notice impugned is void ab-initio; (2) noproceedings under Section 147 read with Section 148 of the Act of 1961 could have been initiated as the Commissioner of Income Tax, Jodhpur, an authority higher to the Assessing Officer, after considering explanation submitted by the assessee dropped the proceedings under Section 263 of the Act of 1961.; and (3) the assessment made by the ITO, Barmer for the assessment year 1988-89 was an agreed assessment, therefore, the principles of promissory estoppal estopes the Assessing Officer to proceed with the reassessment under Section 147 of the Act of 1961. 10. 10. To substantiate the first contention Shri Vineet Kothari, learned Counsel for the petitioner, has referred the provision of Section 147 of the Act of 1961 (to the extent it is relevant in present case) and the provisions of Section 148 of the said Act which reads thus:- "147.-Income escaping assessment.-If the Assessing Officer, [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):" 148.-Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 11. The argument of the Counsel for the petitioner is that the proceedings under Section 147 of the Act of 1961 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 and which come to his notice subsequently. For initiating proceeding under Section 147 of the Act of 1961 a notice as provided under Section 148 of the said Act is required to be served to the assessee enabling him to furnish return with requisite particulars. For initiating proceeding under Section 147 of the Act of 1961 a notice as provided under Section 148 of the said Act is required to be served to the assessee enabling him to furnish return with requisite particulars. No return with requisite particulars and information can be given if the reasons on basis of which Assessing Officer decided to reopen the assessment are recorded and supplied to the assessee. According to the Counsel for the petitioner the liability to record reasons before issuing notice as provided under Section 148(2) of the Act of 1961 means that the reasons are required to be recorded in the notice itself . 12. The argument pressed in service appears to be attractive but on close scrutiny of the provisions of the Act of 1961 feds out with the said attraction. The powers under Section 147 of the Act of 1961 remains administrative powers of the Assessing Officer while reaching at the conclusion to reopen the assessment. The requirement for reopening the assessment is that the decision must be based on a reason to believe that the income of the assessee chargeable to tax escaped assessment in a particular year or in any year. Once the Assessing Officer have a reason to believe that the income chargeable of tax escaped assessment then he is empowered to initiate proceedings under Section 147 of the Act of 1961 by serving a notice upon the assessee as provided under Section 148 of the said Act. A notice under Section 148 of the Act of 1961 is not like a notice to show cause as to why proceedings under Section 147 be not initiated but a notice to submit a return of income as a regular return required to be submitted under Section 139 of Act of 1961. The Assessing Officer is having no authority to withdraw a notice under Section 148 of the Act of 1961 to initiate proceedings under Section 147 of the said Act. The reasons on basis of which Assessing Officer believed that the income chargeable for tax escaped assessment are not subject to contest by the assessee by giving reply to the notice. The only course open to the assessee is to submit a return of income in pursuant to a notice under Section 148 of the Act of 1961. The reasons on basis of which Assessing Officer believed that the income chargeable for tax escaped assessment are not subject to contest by the assessee by giving reply to the notice. The only course open to the assessee is to submit a return of income in pursuant to a notice under Section 148 of the Act of 1961. All the provisions of the Act of 1961 are applicable to a return submitted in pursuant to a notice under Section 148 as if the same return was furnished under Section 139 of the Act of 1961. The requirement of recording reasons to believe that the income chargeable for tax escaped assessment is for the satisfaction of the Assessing Officer to form a definite opinion and to take a decision to reopen an assessment already made. There is no legal embargo upon the Assessing Officer to communicate reasons to assessee. 13. In continuity to the discussion above it is further pertinent to note that there is no provision in the Act of 1961 making it necessary for the Assessing Officer to communicate reasons to the assessee. In the case of S. Narayanappa & Ors. vs. The Commissioner of Income-Tax, Bangalore, AIR 1967 SC 523 , Honble Supreme Court while dealing with the provisions of Section 34(1)(a) of the Income Tax Act, 1922 held as under:- "(4) It was also contended for the appellant that the Income-tax Officer should have communicated to him the reasons which led him to initiate the proceedings under Section 34 of the Act. It was stated that a request to this effect was made by the appellant to the Income-tax Officer, but the Income-tax Officer declined to disclose the reasons. In our opinion, the argument of the appellant on this point is misconceived. The proceedings for assessment or reassessment under Section 34(1)(a) of the Income Tax Act start with the issue of a notice and it is only after the service of the notice that the assessee, whose income is sought to be assessed or reassessed, becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons of the Income-tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi judicial. The earlier stage of the proceeding for recording the reasons of the Income-tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi judicial. The scheme of Section 34 of the Act, is that, if the conditions of the main section are satisfied a notice has to be issued to the assessee containing all or any of the requirements which may be included in a notice under Sub-Section (2) of Section 22. But before issuing the notice, the proviso requires that the officer should record his reasons for initiating action under Section 34 and obtain the sanction of the Commissioner who must be satisfied that the action under Section 34 was justified. There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under Section 34 must also be communicated to the assessee." 14. The provisions of Sections 147 and 148 of the Act of 1961 are corresponding to the provisions of Section 34 of the Act of 1922. Under the Act of 1961 there is no need to obtain sanction from the Commissioner of Income Tax to proceed with under Section 147. Under the Act of 1961 also there is no requirement in any of the provisions of the Act laying down as a condition for initiation of proceedings that the reasons which induce the Assessing Officer to proceed under Section 147 must be communicated to the assessee. 15. While negativing the contention of the Counsel for the petitioner the fact required to be noticed is that in the present case the reasons to believe that the income chargeable for tax escaped assessment were communicated to the petitioner in pursuance to order dated 19.03.2001 passed by this Court and the petitioner has already submitted return. 16. The second contention of the Counsel for the petitioner is that no proceedings under Section 147 read with Section 148 of the Act of 1961 could have been initiated as the Commissioner of Income Tax, an authority higher to the Assessing Officer, after considering the explanation submitted by the assessee dropped the proceedings under Section 263 of the Act of 1961. According to the Counsel for the petitioner the initiation of the proceedings under Section 147 is nothing but repetition of the proceedings which have already acquired finality as a consequence of consideration by Commissioner of Income Tax. 17. I do not find any force in this contention too. The powers under Section 263 of the Act of 1961 are revisional powers vested with Commissioner of Income Tax. Sub-Section(1) of Section 263 of the Act of 1961 reads as under:- "263.-Revision of orders prejudicial to revenue.-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 18. From reading of the provisions of Section 263 of the Act of 1961 it is apparent that the Commissioner of Income Tax is empowered to call for and examine the record of any proceeding under the Act of 1961 and if he considers that any order passed therein by the Assessing Officer is erroneous then such order can be modified or cancelled. The Commissioner of Income Tax while exercising powers under Section 263 of the Act of 1961 examines validity of the proceedings and orders made by the Assessing Officer. The powers under Section 263 of the Act of 1961 by no stretch of imagination can be compared with powers of Assessing Officer under Section 147 of the Act of 1961. Under Section 147 the Assessing Officer if having reason to believe that any income chargeable to tax has escaped assessment for any assessment year he may reassess such income and also any other income chargeable to tax which has escaped assessment. The powers of Commissioner of Income Tax under Section 263 of the Act of 1961 are confined to examination of validity of the proceedings conducted by the Assessing Officer and the orders passed therein. Under Section 147 of the Act of 1961 the Assessing Officer examines and inquires about return submitted by the assessee. The powers of Commissioner of Income Tax under Section 263 of the Act of 1961 are confined to examination of validity of the proceedings conducted by the Assessing Officer and the orders passed therein. Under Section 147 of the Act of 1961 the Assessing Officer examines and inquires about return submitted by the assessee. The return submitted under Section 147 is to be treated as same to the return submitted under Section 139 of the Act of 1961. The proceedings under Section 147 and any order passed therein can further be examined under Section 263 of the Act of 1961. In view of it, it is absolutely misconceived to say that once the proceedings of assessment and an order of assessment has been considered by the revisional authority i.e., the Commissioner of Income Tax no proceedings under Section 147 could have been initiated by the Assessing Officer. 19. The last contention of the Counsel for the petitioner is that the assessment made by the Assessing Officer for the assessment year 1988-89 was an agreed assessment, therefore, the principles of promissory estoppal estopes the Assessing Officer to proceed with reassessment under Section 147 of the Act of 1961. 20. This contention of the petitioner is also having no merit. There is nothing on record on basis of which it can be said that the assessment made by the Assessing Officer for the year 1988-89 was an agreed assessment. The respondents in their reply to the writ petition in quite unambiguous terms denied the facts mentioned by the petitioner in the petition in this regard. Beside above, it is well settled that no estoppal operates against statute. 21. As a consequence of the discussion above, I am of the considered opinion that petition for writ is having no merit and, therefore, the same is hereby dismissed with cost which is quantified as Rs. 5,000/-.