S. Harinivas Chowdry vs Assistant Commissioner of Income Tax

Y. Venkatachalam, J.—Since the subject-matter involved herein and also the parties to the litigation are common, both these writ petitions

are disposed of by this common order with the consent of the parties concerned.

Invoking Article 226 of the Constitution of India, the petitioner herein has filed these writ petitions seeking for a writ of certiorari to call for the

records in the proceedings in 44-005-PY-0311 dated March 29, 1989, and 44-005-PY-0311 dated April 7, 1989, and to quash the same.

In support of the writ petitions, the petitioner herein has filed separate affidavits wherein he has narrated all the facts and circumstances that

forced him to file these writ petitions and prayed that his writ petitions may be allowed as prayed for. Though no counter affidavit has been filed by

the respondent, they argued the matter.

Heard the arguments advanced by learned counsel appearing for the petitioner and also that of learned senior counsel appearing for the

Department. I have also gone through the contents of the affidavit filed by the petitioner and also all the necessary material documents available on

record in the form of typed set of papers. I have also taken into consideration the various points raised by learned counsel appearing for the

respective parties during the course of their argument.

The common point that arises for consideration in these writ petitions is, as to whether there are any valid grounds to allow these writ petitions

or not.

The petitioner herein has been assessed to Income Tax regularly for the past many years. He submitted his return of income for the years 1978-

79 and 1979-80 and his assessments were completed u/s 143 and the tax due thereon were also paid. It is stated by the petitioner that along with

the returns of income, he submitted statements of account including trial balance, statement of total income and account copies of the creditors.

These documents were examined by the Income Tax Officer who completed the aforesaid assessment. In the statement accompanying the return

for the year 1979-80, in the trial balance accompanying"" the return, there were two credits, one in the name of Raghbir Singh for Rs. 75,000 and

another in the name of B. T. Bajan for Rs. 65,000. In respect of both the credits, full particulars were furnished in the statement. Both the creditors

were Income Tax assessees and their GIR numbers were furnished. While the assessment was completed by the Income Tax Officer, u/s 143(1),

the Income Tax Officer was satisfied about the genuineness of the credits and it was only thus being bona fide satisfied about the genuineness of the

credits, that the Income Tax Officer accepted the return and completed the assessment by orders of assessment dated May 26, 1982, for both the

years. While the assessments had thus become final and tax due pursuant to the assessment had also been paid, the petitioner received a letter

from the respondent dated March 2, 1989, stating that regarding the two credits referred to in the return filed by the petitioner, it was seen from

the records that one Raghbir Singh had given the petitioner certain amounts and that therefore it was stated in the said letter that it was proposed to

reopen his assessment for the year 1978-79 u/s 147(a). A similar letter dated March 3, 1989, was received for the assessment year 1979-80. In

the said notices it was stated that the petitioner has not given the full particulars, i.e., full address of the creditors, and he was also required to

furnish his objections to the said proposals by March 8, 1989 and March 9. 1989, respectively. On March 8, 1989, and March 9, 1989, the

petitioner forwarded his objections to the respondent and requested them to drop the reopening proposal. In the said letters it has been stated by

the petitioner that he had disclosed the full particulars of the credits and also had furnished the name and the amount of the parties, in addition to

the assessment file number of at least one of the parties, in whose case, there was no opening"" balance. In the case of the other party, where

admittedly, there was an opening balance, the matter had been accepted in the previous year ; nevertheless, the relevant particulars, were

furnished. Consequently there was no omission to furnish the relevant particulars of the creditors as alleged in the said letters. It was clearly stated

that there was no basis or justification for reopening the assessments u/s 147(a) of the Act, since there was no escapement of income, much less

escapement of income consequent on the failure to furnish material particulars by the petitioner or by reason of furnishing of any inaccurate

particulars. Hence, Section 147(a) was not attracted to the facts of these cases. Thus detailed objections were furnished to the proposal to reopen

the assessments for the years 1978-79 and 1979-80. However, notwithstanding the objections submitted by the petitioner, the respondent has

issued two notices, one dated March 29, 1989, for the year 1978-79 and another dated April 7, 1989, for the year 1979-80. In the notice for the

year 1978-79, the respondent has stated that the notice was being issued after obtaining the necessary satisfaction of the Central Board of Direct

Taxes, in C. No. 289/233/89-IT (Inv.II), dated March 28, 1989. There is no such noting in the notice dated April 7, 1989, relating to the year

1979-80. But the said notice is stated to have been issued, after obtaining the necessary satisfaction of the Commissioner of Income Tax, Central-

I. Therefore, it is stated by the petitioner that the aforesaid notices proposing to reopen the assessments for the years 1978-79 and 1979-80 are

totally illegal, violative of the provisions of the Income Tax Act and without jurisdiction. Citing the several provisions of the Income Tax Act, it is

contended by the petitioner that under the said provisions where the income chargeable to tax, which has escaped assessment amounts to or is

likely to amount to Rs. 50,000 or more the assessment can be reopened within the limitation provided under Clause (ii). This provision was

amended by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The aforesaid provision for reopening of the

assessment would apply only if there is an escapement of income. It is contended by the petitioner that where there is no finding on the basis of

materials on record that there is an escapement of income, the assessment is reopened merely to facilitate a fishing or roving enquiry, the reopening

of assessment would not be permitted. The only reason mentioned in the letter sent by the respondent is that the petitioner has not given full

particulars, i.e., full address of the creditors. There is not even an allegation that these credits are not genuine or that income has escaped

assessment. In fact full information and particulars have been furnished regarding the credits and there is no basis or justification to assume that

income has escaped assessment. While calling for the objection to the proposed reopening of the assessment, the only averment is that there are

certain credits and the full particulars of the creditors have not been furnished. Obviously it is on the basis of this averment alone that the approval

of the Board for the reopening of the assessment appears to have been obtained on March 28, 1989, in respect of the assessment year 1978-79

and the approval of the Commissioner obtained in respect of the year. Therefore, in the above circumstances, the proposed reopening is totally

illegal, violative of the provisions of the Act and without jurisdiction and the reopening proceedings pursuant to the notice u/s 148 are liable to be

quashed. Hence, these writ petitions. Having seen the entire documents available on record, the following"" are the admitted facts in this case. The

petitioner herein is an Income Tax assessee and he submitted his returns of income for the years 1978-79 and 1979-80 and his assessments were

completed u/s 143. The tax due thereon was also paid. That being so, while the assessments had thus become final and the tax due pursuant to the

assessment had also been paid the respondent issued notices proposing to reopen the assessments for the years 1978-79 and 1979-80.

Therefore, now the issue before the court is as to whether the said notices u/s 148 proposing to reopen the assessments are in accordance with the

provisions of the Act or not. The relevant sections in this connection are Sections 147(a) and 148 to 153. Section 149 prescribes the time-limit for

issue of a notice u/s 148, for reopening the assessment u/s 147. After a careful perusal of the provisions of the above Sections, it is clear that

where the income, chargeable to tax, which has escaped assessment amounting to or is likely to amount to Rs. 50,000 or more, the assessment

can be reopened within the limitation provided under Clause (ii). Thus the aforesaid provision for reopening of the assessment would apply only if

there is an escapement of income, Therefore, now the court has to examine whether there is any proved escapement of income.

It is significant to note that in the letter dated March 2, 1989, issued by the respondent in respect of the assessment year 1978-79, the

respondent has merely stated that he proposes to reopen the assessment u/s 147(a) for the mere reason that prima facie the petitioner has not

given full particulars, i.e., full address of the creditors. The same reason is adduced for reopening the assessment for the year 1979-80. It is also

significant to note that there is not even an allegation that these credits are not genuine or that income has escaped assessment. Apart from that

even in the detailed letter preceding the issue of the printed notice, the respondent has not even alleged that there has been escapement of income.

Even while calling for an objection to the proposed reopening of the assessment, the only averment is that there are certain credits and the full

particulars of the creditors have not been furnished. But from the records it is seen that even the Income Tax assessment proceeding''s of the

creditors have been furnished, which would be more than sufficient to show that all relevant particulars have been furnished. Further, the credits

have been disclosed with the GIR numbers of the creditors. No information relating to the credits which has been sought has been withheld.

Hence, in these, cases, there is no failure to furnish material particulars nor escapement of income, Further, there is no allegation at all that income

has escaped assessment either by reason of non-furnishing of particulars or otherwise.

It is contended on behalf of the petitioner that even assuming"" without conceding that some more particulars with regard to certain credits can be

furnished, that would not constitute a valid reason for assuming that income has escaped assessment, particularly in the absence of even an

allegation to the effect in the notice proposing to reopen the assessment. There is force in this contention of the petitioner. It is also contended by

the petitioner that the assessment is sought to be reopened within the extended limitation and, hence, the notice should be self-contained find the

necessary ingredients for invoking the jurisdiction should be established and that has not been done here. But, on the other hand, there is not even

an averment to this effect. It is significant to note that the Income Tax Act has been amended to ensure finality of assessment, and thus Parliament

has recognised the importance of assessment reaching a finality and the necessity to ensure that assessments are not reopened without any basis or

justification. Therefore, it is crystal clear that unless the necessary ingredients of Section 147 are established, the assessment cannot be reopened.

But, that aspect is apparently absent in these cases. There is not even an averment on the side of the respondent that there is any escapement of

income. That being so, the proposed reopening is illegal and without jurisdiction, as there is no escapement of income warranting the reopening of

the assessment already completed.

Therefore, for all the aforesaid reasons and in the facts and circumstances of these cases and also in the light of my above discussions regarding

several aspects of this case, I am of the clear view, that the proposed reopening of the assessment already completed in these cases is illegal and

without jurisdiction and that, therefore, it is liable to be quashed. Thus, both the writ petitions succeed and are allowed.

In the result, both the writ petitions are allowed and, consequently, the proceedings of the respondent .impugned in these writ petitions are

hereby quashed. W. M. Ps. are dismissed. No costs.