Allahabad High Court
Smt. Jamila Ansari vs Income Tax Department And Anr. on 3 September, 1996
Equivalent citations: (1997)137CTR(ALL)587, [1997]225ITR490(ALL), [1997]92TAXMAN603(ALL)
JUDGMENT M.C. Agarwal, J.
1. By this petition under article 226 of the Constitution of India, the petitioner challenges an assessment order dated January 31, 1994, passed under Section 147 of the Income-tax Act, 1961, (hereinafter referred to as "the Act"), and a preceding notice under Section 148 dated February 2, 1993.
2. We have heard Sri Sudhir Chandra, assisted by Sri S. D. Singh, advocate, learned counsel for the petitioner, and Sri Shekhar Srivastava, learned counsel for the respondents.
3. The petitioner is doing the business of export of rugs and druggets. Under section 80HHC of the Act, profits derived by an assessee from the export of goods are to be excluded from its total income. The petitioner's assessment for the assessment year 1988-89 was initially made on March 16, 1989, in which no deduction under Section 80HHC was allowed in respect of interest amounting to Rs. 8,92,226 earned on fixed deposit receipts which was taken to the profit and loss account by the assessee. The Assessing Officer discussed the petitioner's claim as under :
" On a perusal of balance-sheet it shows that the assessee is having of F.D.R. of Rs. 32,55,000. In spite of specific queries, the assessee has not furnished the details of interest account and as such a notice under Section 143(3) dated March 9, 1989, has been given asking the assessee to furnish the details of interest account. In compliance with the assessee had filed a written reply dated March 15, 1989, and stated that the interest received on FDR is Rs. 3,92,226, while claiming the deduction under Section 80HHC the assessee has considered the interest and contended that interest on FDR is to be considered while making the claim under Section 80HHC. From the records of the assessee it is seen that in the assessment year 1986-87 a similar issue was involved and the assessee was not allowed the deduction of bank interest while calculating the claim under Section 80HHC. Against this order, the assessee went in appeal before the learned Commissioner of Income-tax (Appeals), who allowed the same, vide order dated July 22, 1988. This order of the learned Commissioner of Income-tax (Appeals) was not accepted by the Department and second appeal has been filed before the Hon'ble Tribunal which is still pending. In view of these circumstances, the interest on FDR amounting to Rs. 3,92,226 and profit on sale of premium entitlement amounting to Rs. 69,464 are not treated as export profit and the assessee is not entitled for deduction under Section 80HHC on these two amounts. "
4. The assessment was set aside on the assessee's appeal preferred to the Commissioner of Income-tax (Appeals) and a fresh assessment was made on December 26, 1990, in which again the assessee's claim was not accepted. Subsequently, by an order dated January 30, 1991, passed under Section 154 of the Act, the Assessing Officer rectified the assessment at the instance of the petitioner and allowed deduction of the aforesaid sum of Rs. 3,92,226 under Section 80HHC of the Act. Thereafter, the Assessing Officer issued a notice dated February 2, 1993, under Section 148 of the Act requiring the assessee to file a return of income as he had reasons to believe that her income for the said year had escaped assessment. The petitioner filed a revised return declaring an income of Rs. 41,370 that was declared earlier. This was done on December 2, 1993, and, simultaneously, she applied to the Assessing Officer to supply her the reasons for initiating the reassessment proceedings. The reasons were supplied through a letter dated January 18, 1994, a copy of which has been annexed to the writ petition as annexure "7". The reasons for the issue of a notice under Section 148 of the Act have been stated as under :
" From the perusal of "A" balance-sheet, it is evident that assessee possesses fixed deposit with bank for Rs. 32,55,000 and enjoyed interest income of FDRs to the tune of Rs. 3,92,226. The income from interest on FDR is taxable under the head "Income from other sources" and is not entitled for exemption under Section 80HHC, as has been held by the Appellate Tribunal, Allahabad, in the case of the assessee for the assessment year 1986-87. Thus, I have reason to believe that the assessee's income to the tune of Rs. 3,92,226 has escaped assessment. To assess the escaped income action under Section 147/148 is called for.
(Sd.) Income-tax Officer, January 11, 1993."
5. In the said letter, it was intimated to the assessee that February 1, 1994, is fixed for hearing, but the Assessing Officer completed the assessment a day before, that is, on January 31, 1994, and thus deprived the assessee of the opportunity of hearing. It is also asserted in the petition that the reasons recorded are not germane to the determination of the income for the year under consideration and, therefore, the proceedings under Section 147 of the Act have not been validly initiated.
6. In the counter-affidavit, the respondents have contended that the sum of Rs. 3,92,226 that was earned as interest on the fixed deposit receipts could not be treated as profit arising from export of goods and, therefore, by excluding the same under Section 80HHC of the Act, income to that extent had escaped assessment and that the Assessing Officer rightly initiated proceedings for reassessment. The counter affidavit is silent about the assessee's allegation that though the assessee was intimated that its case will be taken up for hearing on February 1, 1994, the assessment order was passed a day before.
7. Proceedings for reassessment of escaped income could be initiated under Section 147 of the Act if the Assessing Officer had in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. The information that the Assessing Officer claims to have acquired was that for the assessment year 1986-87, the Income-tax Appellate Tribunal had held that income of interest from fixed deposit receipts was taxable under the head "Income from other sources" and was not entitled for exemption under Section 80HHC of the Act. It is not stated in the reasons that the fixed deposit receipts on which interest was earned in the year 1988-89 were the same on which the interest was earned in the accounting period relevant to the assessment year 1986-87. Therefore, the Tribunal's finding on the facts relevant to the assessment year 1986-87 could not be mechanically adopted for the assessment year 1988-89 and could not provide a reason to believe that for the assessment year 1988-89 also, the interest income was to be taxed as income from other sources. The assessment orders dated March 16, 1989, and December 26, 1990, show that the Assessing Officer had not granted deduction under Section 80HHC of the Act on the amount of interest, that is, Rs. 3,92,226. The order passed under Section 154 of the Act is virtually a non-speaking order and does not show how there was a mistake apparent from the record in the assessment order. Yet the Assessing Officer rectified the assessment by excluding Rs. 3,92,226 from the taxable income under Section 80HHC of the Act. This was a patently wrong order and the remedy lay either by rectifying the same under Section 154 or by invoking the Commissioner's jurisdiction under Section 263 of the Act, but the Assessing Officer has adopted a queer way to exercise a power of review under the garb of a reassessment under Section 147 of the Act.
8. It is settled law that an Income-tax Officer has no power to review his order and he could not do so in the purported exercise of the authority under Section 147 of the Act. The mere fact, that for another year, the Tribunal had taken another view on the facts relating to that year, could not be a ground for having reason to believe that the same conclusions can be drawn for the year under consideration. We are, therefore, of the view that the issue of a notice under Section 148 of the Act was unauthorised.
9. As regards the assessment, it is patently illegal and seems to be intended to prevent the assessee from challenging the notice in an appropriate forum because, as mentioned in the assessment order itself, the assessee had filed a written reply on January 31, 1994, and had sought a month's time for making arrangements and smooth conduct of the case. The Assessing Officer, therefore, indulged in gross impropriety and illegality in not waiting for the assessee to appear on February 1, 1994, and in finalising the assessment on January 31, 1994. For the above reasons, the impugned notice as well as the assessment order deserve to be quashed.
10. It was contended by learned counsel for the respondents that the assessee has the alternative remedy of challenging the assessment as well as the notice in an appeal preferred against the assessment under Section 246 of the Act. It is true that the petitioner has such an alternative remedy, but the existence of an alternative remedy is not an absolute bar to the exercise of jurisdiction under article 226 of the Constitution of India by a High Court. Because of the circumstances of the case, mentioned above, we are of the view that this plea of the respondents deserves to be rejected.
11. In the result, the writ petition is allowed with costs and the impugned assessment order dated January 31, 1994, for the assessment year 1988-89 and the notice dated February 2, 1993, are hereby quashed.