Calcutta High Court
Mulchand Rampuria vs Income-Tax Officer And Anr. on 24 August, 2001
Equivalent citations: [2001]252ITR758(CAL)
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose
JUDGMENT Pinaki Ghandra Ghose, J.
1. The petitioner has challenged a notice dated May 24, 1993, issued by the Income-tax Officer, respondent No. 1 herein, under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the said Act"), and the reassessment proceedings under Section 147 of the said Act for the assessment year 1989-90 and all proceedings relating thereto and thereunder on the ground that the conditions precedent for the assumption of jurisdiction have not been satisfied and as such notice and assessment proceedings are wholly without jurisdiction.
2. The facts of the case briefly are as follows :
The writ petitioner is the sole executor to the estate of Sundar Devi Rampuria who died on October 28, 1975, leaving a registered will dated May 6, 1964 (hereinafter referred to as "the said deceased"). A probate of the said will has been granted to the petitioner. According to the petitioner, apart from the status of the said executor to the estate of the said deceased, the petitioner is also regularly assessed separately with his own income in the status of an "individual".
3. The petitioner duly filed a return for the assessment year 1989-90 as sole executor. The petitioner has further contended before this court that the reasons recorded by respondent No. 1 annexed to the affidavit-in-opposition filed in this proceedings show that the Assessing Officer has reason to believe that the income has escaped assessment in respect of the share trading loss of Rs. 99,250 for the said year. It further appears from the said affidavit that the executor has no power to carry out any business and he has a right only to execute the estate in terms of the will. It has also been stated that the petitioner carried on a business in his personal capacity and not as an estate. The estate is not responsible for the loss incurred by the petitioner in respect of the business. Accordingly, the respondents did not allow the petitioner to set off the business loss from the income of the estate.
4. According to the petitioner, the assessment for the assessment year 1990-91 was completed under Section 143(3) of the said Act rejecting the claim of loss on share dealing business, amounting to Rs. 1,09,540. The appeal preferred by the petitioner was allowed by the first appellate authority and the appellate authority held that the Assessing Officer was not justified in not allowing the loss suffered in the business of share dealing while computing the total income.
5. Accordingly, it is submitted that further assessment is not permissible in law and the impugned notice under Section 148 of the said Act is invalid, baseless and which is liable to be quashed.
6. The contention of the petitioner that the assessment year 1990-91 was duly completed by the Assessing Officer under Section 143 rejecting the claim of the petitioner to adjust the loss amounting to Rs. 1,09,540 in respect of the share dealing business. An appeal was duly preferred by the petitioner before the first appellate authority which was duly allowed by the said authority whereby the appellate authority held that the disallowing of the loss from the computation of the total income was not justified by the Assessing Officer.
7. In these circumstances, the learned advocate appearing on behalf of the petitioner contended that further assessment is not permissible under the law and, therefore, the impugned notice under Section 148 of the said Act is invalid and is liable to be quashed. He further relied upon the judgments reported in V. M. Raghavalu Naidu & Sons v. CIT/CEPT [1950] 18 ITR 787 (Mad) ; Asit Kumar Ghose v. CAIT [1952] 22 ITR 177 (Cal) and Administrator-General of West Bengal for the Estate of Raja P. N. Tagore v. CIT , and contended that the petitioner has a right to continue the share dealing business left by the said deceased.
8. He further relied upon the judgments reported in Ganga Saran & Sons P. Ltd. v. ITO ; ITO v. British Paints India Ltd. ; ITO v. Nawab Mir Barkat Ali Khan Bahadur and ITO v. Lakhmani Mewal Das and submitted that reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. He further contended that there must be a reason to believe that there has been an escapement of income for a particular assessment year.
9. He further contended that the Assessing Officer could not form any valid reason to believe in the instant case and therefore, notice which has been issued by the Assessing Officer is bad and the same is liable to be quashed. He further relied upon Indian and Eastern Newspaper Society v. CIT ; Indian Oil Corporation v. ITO and ITO v. Lakhmani Mewal Das and submitted that an error discovered on a reconsideration of the same material does not give power to the Income-tax Officer to reopen or to make assessment for the escaped income.
10. He further submitted that the change of opinion is not permissible in a proceeding under Section 147 of the said Act. In support of his submission, he relied upon the judgments reported in Allahabad Bank v. CIT ; CIT v. Bhanji Lavji and CIT v. Gujarat Ginning and Manufacturing Co. Ltd. .
11. He further contended that the service of the notice is a condition precedent for initiation of the proceedings under Section 147 of the said Act. According to him, if no notice is issued or if the notice is issued, it can be shown that the same is invalid in that case. Steps taken thereunder should be treated as illegal. He further submitted that the notice served upon the petitioner only in his individual name without describing the capacity and the status of the petitioner as such executor. Accordingly, he submitted that the same should be quashed as the same is not curable by virtue of the provisions of Section 292B. He further placed reliance on the judgments reported in Shyam Sundar Bajaj v. ITO ; Sewlal Daga v. CTT [1965] 55 ITR 406 (Cal) and Rama Devi Agarwalla v. CIT .
12. The learned advocate appearing on behalf of the respondent contended that the impugned notice is valid in all respects. Both the conditions precedent are fulfilled, i.e.,
(a) the Assessing Officer has reason to believe that by reason of the omission or failure on the part of assessee income chargeable to tax has escaped assessment for the relevant assessment year ;
(b) the assessee has failed to disclose fully and truly all material facts necessary for his assessment for the said year.
13. In support of such contention, he relied upon the judgments reported in Ganga Saran & Sons P. Ltd. v. ITO ; Sri Krishna Pvt. Ltd. v. ITO and Indo-Aden Salt Manufacturing and Trading Co. P. Ltd. v. CIT .
14. He further submitted that the condition precedent under Section 148 of the said Act duly satisfied as it would be evident from the abstract of file forming annexure A to the affidavit-in-opposition. Reasons duly recorded in the file. There is no necessity of communicating the reasons of notice under Section 148 of the said Act. In support of such submission, he relied upon the judgments reported in Ajantha Industries v. CBDT and Gulabrai Hanumanbux v. WTO/ITO [1989] 178 ITR 519 (Gauhati).
15. He also contended that both the notice as well as service is valid and any mistake in the description of the petitioner does not invalidate the same. Section 292B of the said Act was introduced with effect on and from October 1, 1975. In support of such contention, he relied upon the judgments reported in I. Devarajan v. Tamil Nadu Farmers Service Co-operative Federation and Mahadeo Biscuits and Confectionery Works v. CIT .
16. He further submitted that the contention of the petitioner with regard to the absence of intimation under Section 143(1)(a) and non-communication of the order of assessment is untenable in the facts of the case. No intimation or order is required to be issued/passed in a case where there is no prima facie adjustment or demand arising out of an assessment. The requirement of an intimation could arise only when there is proposal for adjustment and communication of an order if there is a demand and in the instant case facts are otherwise. It cannot be alleged that in the absence of an intimation or demand the assessment is pending.
17. He also contended that the formation of an opinion for the said notice under Section 148 is valid in all respects and sufficient materials were on record before the respondent. There is no necessity of communicating the formation of opinion to the petitioner. Reliance is placed on Gulabrai Hanumanbux v. WTO/ITO [1989] 178 ITR 519 (Gauhati).
18. He further submitted that the judgments relied upon by the petitioner are distinguishable in nature and he further contended that the only question at this stage that the court will find out is whether sufficient materials on record were, duly recorded before issuing the said notice under Section 148 of the said Act. In support of such contention, he relied upon a judgment reported in Raymond Woollen Mills Ltd. v. ITO .
19. After hearing the parties and the submissions made before me I have considered the case of the petitioner and the respondent. At this stage, in my opinion, it would be proper for me to quote Section 148 of the said Act which is reproduced hereunder :
"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."
20. In my opinion the Section is very clear in this respect as the Section specifically empowers the Assessing Officer that before making the assessment and reassessment or recomputation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to do so under the said Section within such period mentioned therein. A notice under this Section is a condition precedent to the validity of any assessment under Section 147 of the said Act. The notice would be invalid if it does not specify the correct assessment year or is not signed, or is issued to a dead man or to the assessee as an individual when the correct status of the assessee is that of a Hindu undivided family. This principle has already been settled by the court in several judgments. After the enactment of Section 292B which came into force on October 1, 1975, no notice shall be deemed to be invalid merely by reason of any mistake, defect or omission therein if the notice "is in substance and effect in conformity with or according to the intent and purpose of this Act."
21. It appears from the record and the affidavit filed before this court that the reasons have been disclosed in the said affidavit-in-opposition which has been filed before me. I do not have any hesitation to hold that the Assessing Officer has authority to issue such notice. It further appears that the reasons were duly recorded in the file which appeared in the affidavit-in-opposition and further it has been held by the court that it is not necessary for communication of the reasons for issuance of notice under Section 148 of the said Act. Therefore, I do not have any hesitation to accept the contention of the learned advocate appearing on behalf of the respondents. It further appears that the Section itself empowers the Assessing Officer to assess and reassess, therefore, there cannot be any reason on the facts of this case that the petitioner should not appear before the said authorities when the notice in my opinion, is valid and has been issued in accordance with the provisions of the said Act.
22. It further appears from the judgment delivered by the Supreme Court reported in Raymond Woollen Mills Ltd. v. ITO , that the reasons were duly recorded by the Assessing Officer before issuing the notice under Section 148 of the said Act. Accordingly, in my opinion, this court will not interfere in the matter at this stage. The apex court has specifically stated in the said judgment of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34, that the court can find out whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be gone into by the court. Accordingly, in my opinion, it is not necessary for me to go into the sufficiency or correctness of the said material. But I have found the respondent authorities duly recorded the reasons before issuing the notice under Section 148 of the said Act which is only in my opinion to find out at this stage whether has been done by the authorities. In my opinion, such steps have been taken in this matter properly and there is no reason to interfere therewith by this court. I do not have any hesitation to accept the contention of the respondent that if the notice "is in substance and effect in conformity with or according to the intent and purpose of this Act", therefore, in my opinion, the said notice is also valid and does not warrant any interference by this court.
23. Accordingly, this application must fail and is hereby dismissed.