Gujarat High Court
Sagar Enterprises vs Assistant Commissioner on 26 December, 2001
Equivalent citations: [2002]257ITR335(GUJ)
JUDGMENT
D.A. Mehta J.
1. The petitioner, a partnership firm, has challenged in this petition a notice under Section 148 of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), issued on October 3, 1997, for the assessment year 1991-92.
2. As the period of four years had elapsed from the end of the assessment year, namely, the assessment year 1991-92, the respondent was called upon by issuance of notice and subsequently affidavit-in-reply dated December 10, 1997, has been filed along with the reasons recorded on August 18, 1997. Rule was issued on December 15, 1997.
3. When the matter came up for hearing earlier, it was submitted on behalf of the petitioner that the reasons recorded to the following effect are factually incorrect.
"The assessee-firm is engaged in the business of construction. The said firm came into existence vide partnership deed dated October 1, 1990. Therefore, the relevant previous year for the firm for filing its first return of income would be October 1, 1990 to March 31, 1991. On a perusal of the records it is noted that no return for the assessment year 1991-92 has been filed by the assessee-firm. As per Explanation 2(a) to Section 147 the following shall be deemed to be a case where income chargeable to tax has escaped assessment".
4. Therefore, Mr. Kaji, learned counsel appearing on behalf of the petitioner, sought time to place on record the details about the filing of the return. Along with the affidavit-in-rejoinder, xerox copies of the following documents have been annexed.
(i) Intimation dated March 9, 1992, issued under Section 143(1)(a) of the Act.
(ii) Acknowledgment dated August 28, 1991, of filing of return for the assessment year 1991-92.
(iii) Statement of income for the assessment year 1991-92.
5. At the time of hearing, originals of all the three documents have been produced for perusal of the court.
6. On going through the reasons recorded and the documents which have been produced on affidavit, it is apparent that the reasons which are recorded are de hors the facts available on record. Mr. Mihir Joshi, learned standing counsel appearing on behalf of the respondent, stated that in para. 2 of the reasons recorded, the respondent has also referred to action under Section 132 of the Act which was carried out at the premises of one Shri G.D. Shah in February, 1992, and has submitted that at least that part of the reasons would survive vesting the respondent with jurisdiction to initiate and continue action under Section 147 of the Act.
7. On going through the entire reasons recorded, it can be seen that in the penultimate paragraph, the respondent has further recorded as under :
"Further, the assessee was required to file the return of the income for the assessment year 1991-92 which the assessee has failed. Moreover, it was the duty of the assessee to declare this transaction and to file the return of income for the assessment year 1991-92. The assessee has failed on both these counts. Therefore, the escapement of assessment of income is solely attributable to the assessee."
8. Therefore, it is apparent that the factor of non-filing of the return for the assessment year 1991-92 has overbearingly weighed with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income.
9. On the basis of the same, even for the sake of argument, if the contention raised by Mr. Joshi is taken into consideration, the settled legal position is that in such circumstances, it would not be possible to say with certainty as to which factor would have weighed with the officer concerned and once it is shown that an irrelevant fact has been taken into consideration, to what extent the decision is vitiated would be difficult to say. On this count alone, the petition requires to be accepted.
10. However, there is one more aspect of the matter which requires to be taken into consideration. In the affidavit-in-reply, it is the say of the respondent himself that the said payment which is stated to be undisclosed income relevant for the assessment year 1991-92 could have been made during the financial year 1990-91 relevant to the assessment year 1991-92 and hence, "to cover up that probability, protective addition was made in the assessment year 1992-93". Thereafter, in the affidavit-in-reply, the respondent has further stated thus :
"Hence, in the relevant case, addition of Rs. 17,98,500 was made in the assessment year 1992-93 on protective basis and substantial addition was required to be made in the assessment year 1991-92 and for that reopening under Section 147 of the Income-tax Act was initiated after recording reasons which are annexed hereto and marked annexure I".
11. From the facts that have come on record, protective assessment for the assessment year 1992-93 was carried in appeal by the assessee and on the assessee succeeding before the Commissioner (Appeals), the Revenue has filed second appeal before the Tribunal which is stated to be pending. It is pertinent to note that the first appellate authority decided the appeal for the assessment year 1992-93 on January 26, 1996 (sic), and the reasons have been recorded thereafter on August 18, 1997.
12. Therefore, taking into consideration the totality of the circumstances and the facts which have come on record, it is apparent that the respondent him self is not sure as to the year of taxability and whether the said item requires to be taxed in the assessment year 1991-92 or the assessment year 1992-93. In such a situation, it is not possible to agree with the stand of the Revenue that any income could be stated to have escaped the assessment for the assessment year 1991-92 as a consequence of any failure or omission on the part of the assessee.
13. The petition is therefore allowed. The impugned notice dated October 3, 1997 (annexure R) is quashed and set aside. Rule is made absolute with no order as to costs.