Delhi High Court
Commissioner Of Income-Tax vs Delhi Automobiles (P.) Ltd. on 3 May, 1989
Equivalent citations: [1990]185ITR330(DELHI)
JUDGMENT Leila Seth, J.
1. This is an application by the Commissioner of Income-tax under section 256(2) of the Income-tax Act, 1961, praying that the Income-tax Appellate Tribunal be directed to draw up a statement of case and refer the following question of law for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that action under section 147(b) has not been validly taken in this case by ignoring the material fact that the Income-tax Officer has recorded proper reasons before initiation of such action ?"
2. The relevant assessment year is 1974-75. The assessed was dealing at that time in Ambassadors cars, mini buses, scooters, etc. The original assessment was made under section 143(3) read with section 144B of the Act on August 26, 1977. On January 9/11, 1979, the Income-tax Officer issued a notice under section 148 of the Act to the assessed which was served on January 12, 1979. A return was filed in response to this notice on February 14, 1979, and the assessment order under section 147(b) was passed on July 4, 1980, by this order, the Income-tax Officer included a sum of Rs. 80,000 as chargeable to tax which, according to him, had escaped assessment for the assessment year 1974-75.
3. The assessed challenged the validity of this order as he contended that the action under section 147 was illegal. The Commissioner of Income-tax (Appeals) allowed the appeal. He noted that, while dealing with the assessment proceedings for the subsequent assessment year 1975-76, the Income-tax Officer had directed the assessed to file details of creditors including trade creditors in respect of deposits received against sales of vehicles. During the course of the proceedings, the assessed claimed that it was common practise to receive deposits from prospective customers and adjust these against sale of vehicles in due course. The Income-tax Officer noticed that there was opening credit balances indicating that the assessed had received as deposits from Udai Singh, Kasturi Lal, Gurcharan Singh and L Kumar sums of Rs. 20,000, Rs. 15,000, Rs. 25,000 and Rs. 20,000 respectively, in the accounting year ending on June 30, 1973, relevant to the assessment year 1974-75. Consequently, he directed the assessed to explain the sources of these deposits which had been brought forward from the year 1974-75. The assessed furnished the addresses of these parties and notices were sent to them under section 131 of the Act. However, these notices were not served on these parties. Subsequently, the assessed traced three out of the four parties and furnished their affidavits confirming the fact of deposits having been made by them with the assessed.
4. The Income-tax Officer had considered these deposits as unexplained and made an addition of Rs. 80,000 in the draft assessment order. The Inspecting Assistant Commissioner directed that these deposits could not be taxed in 1975-76 and consequently on January 9, 1979, the Income-tax Officer reopened the assessment for the relevant year under section 147.
5. The assesee's stand was that the reasons recorded on January 9, 1979, before issuing the notice could be "reasons to suspect" that the deposits were not genuine but certainly not "reasons to believe" that the deposits were not genuine. Merely because the registered letters were returned unserved by the postal authorities, the deposits could not be rendered non-genuine. The Commissioner of Income-tax (Appeals) considered the facts and accepted the assessed's contention and came to the conclusion that there was no evidence before the Income-tax Officer at the time of reopening the assessment on January 9, 1979, against the genuineness of the deposits. Consequently, he held that the assessment was reopened mainly on suspicion. He, therefore, held the proceedings under section 147(b) of the Act to be without jurisdiction.
6. The Revenue appealed to the Tribunal. The specific ground raised in the appeal was as follows :
"On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) IX, New Delhi, was not justified in holding that there was no 'reason to believe' with the Income-tax Officer that the loans were not genuine on the day when the proceedings were reopened under section 147(b) of the Income-tax Act, 1961."
7. The Tribunal noted the categorical finding of the Commissioner of Income-tax (Appeals) which reads as follows :
"The material on record only establishes that the deposits made by the parties had been accepted by the Income-tax officer in 1973-74 proceeding. In 1974-75, the Income-tax Officer had no material on the basis of which he reopened the assessment except that he suspected that possibly these balances which were repaid back were not genuine."
8. The Tribunal then observed that, in view of "the above categorical finding of the learned Commissioner of Income-tax (Appeals)", which "has not been controverter by the learned departmental representative, the appeal has to be dismissed.
9. The Revenue then moved under section 256(1) of the Act. The application was rejected as the Tribunal observed that the abovementioned finding of "the Income-tax Appellate Tribunal speaks of the fact that the categorical finding of the learned first appellate authority has not been controverter by the Revenue. As such, it was of the view that the order of the Tribunal "cannot be said to give rise to a question of law, much less the question suggested by the Revenue".
10. Before us, Mr. Wadera has vehemently urged that the Commissioner of Income-tax (Appeals) has recorded an erroneous finding with regard to the material on record pertaining to the assessment year 1973-74; further, the Tribunal has been in error in confirming this finding. He, however, concedes that this finding was neither challenged before the Tribunal nor was any rectification application moved by the Revenue to get this finding corrected.
11. In this view of the matter, it is quite clear that the order of the Commissioner of Income-tax (Appeals) which has been confirmed by the Tribunal indicates that no evidence against the genuineness of the deposits was available with the Income-tax Officer at the time of reopening of the assessment on January 9, 1979.
12. Consequently, no question of law arises and the application is, accordingly, rejected. However, in the circumstances of the case, we make no order as to costs.