Punjab-Haryana High Court
Gurera Gas Cylinders Pvt. Ltd. vs Commissioner Of Income-Tax And Anr. on 29 September, 2000
Equivalent citations: (2003)180CTR(P&H)159
Author: Nirmal Singh
Bench: Nirmal Singh
JUDGMENT G.S. Singhvi, J.
1. This is a petition for quashing notice annexure P-9 dated March 25, 1995, issued by the Additional Commissioner of Income-tax, Special Range, Faridabad (respondent No. 2), under Section 148 of the Income-tax Act, 1961 (for short, "the Act"), to the petitioner.
2. The petitioner filed a return for the assessment year 1991-92 declaring an income of Rs. 2,890. It claimed deduction under Section 80-I of the Act on the premise that it had set up a new industrial unit. By an order passed under Section 143(1)(a) of the Act, the Assessing Officer disallowed the deduction claimed by the petitioner and determined its taxable income at Rs. 3,94,890. An application filed by the petitioner under Section 154 was rejected by the Assessing Officer vide order dated September 4, 1992. The Commissioner of Income-tax (Appeals) reversed the order of the Assessing Officer and accepted the petitioner's claim for deduction. In the meanwhile, the Assessing Officer passed a regular assessment order under Section 143(3) of the Act. He again disallowed the petitioner's claim for deduction, but the Commissioner of Income-tax (Appeals), Faridabad, accepted the appeal and allowed the petitioner's claim for deduction under Section 80I of the Act.
3. For the assessment year 1992-93, the petitioner filed the return on December 31, 1992, declaring an income of Rs. 2,41,850 and claimed deduction under Section 80I. The Assessing Officer disallowed the deduction and assessed the petitioner's income at Rs. 8,58,327. However, on an application filed under Section 154, he passed the order annexure P-7 dated March 30, 1993, allowing the deduction. In the regular assessment made under Section 143(3), the Assessing Officer accepted the petitioner's claim for deduction and finalised the assessment vide order dated January 31, 1994. After about three years, respondent No. 2 issued the impugned notice under Section 148 and called upon the petitioner to show cause against the proposed reassessment by observing that its income for the assessment year 1991-92 had escaped assessment within the meaning of Section 147 of the Act. On the petitioner's demand, respondent No. 2 supplied detailed reasons which prompted him to initiate proceedings for reassessment. For the sake of convenience, notice annexure P-9 and the reasons contained in annexure P.11 are reproduced below :
"Notice annexure P-11 Whereas I have reason to believe that your income in respect of which you are assessable chargeable to tax for the assessment year 1991-92 has escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961.
I, therefore, propose to reassess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income for the said assessment year.
This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax . . the Central Board of Direct Taxes.
Reasons recorded in annexure P-11
1. From the perusal of assessment records for the assessment year 1991-92, it is observed that the assessee had claimed deduction under Section 80I at Rs. 1,59,657. However, the assessee had nowhere disclosed that a separate unit had been set up by it during the year. Even the primary and material facts with regard to claim of deduction under Section 80I, viz., date of setting up of unit, investment made and the items manufactured in the unit or the details of plant and machinery, whether new plant and machinery was purchased and if so when ; had been disclosed. Only the computation of income for the allow-ability of deduction under Section 80I was annexed with the return. However, no separate profit and loss account or balance-sheet for the industrial undertaking was filed during the course of assessment proceedings. As a result it is not known how profit of Rs. 8,11/538 had been worked out.
2. Since the assessee has not disclosed primary facts about setting up a separate industrial undertaking, it is not known whether all the conditions as envisaged under Section 80I are satisfied and thus the assessee did not discharge onus laid down upon it for claim of deduction under Section 80I.
4. A bare reading of the assessment order that deduction under Section 80I had been allowed on the profits of the company and not on the profits of a separate industrial undertaking and that too before setting off of b/f losses.
Apparently due to non-disclosure of material and primary facts with regard to setting up of a separate industrial undertaking on the profits of which the assessee sought to claim deduction under Section 80I, income to the extent of deduction allowed (Rs. 4,11,380) has escaped assessment in terms of clauses (C)(iii) and (C)(iv) of Explanation to Section 147. It is also noticed that there is no mention in the assessment order dated June 28, 1993, about the facts relevant to setting up of a separate unit since the income as aforesaid has escaped assessment. Accordingly, issue notice under Section 148 of the Income-tax Act, 1961."
4. The petitioner submitted representation dated May 30, 1996 (annexure P-12) to the Commissioner of Income-tax, Rohtak, against the proposed reassessment and then filed this petition for quashing notice annexure P-9 and consequential proceedings by contending that the impugned notice is ultra vires the provisions of Section 148 read with Section 147 of the Act. It has averred that respondent No. 2 did not have any material before him on the basis of which he could believe that income of the petitioner had escaped assessment. The petitioner's case is that while claiming deduction under Section 80I, it had not suppressed any information from the Assessing Officer and, therefore, there can be no justification for initiation of proceedings under Section 148.
5. The respondents have raised an objection to the maintainability of the writ petition on the ground that the petitioner has failed to avail of the alternative remedies available to it. According to them, the petitioner can file a reply to the show-cause notice and convince respondent No. 2 against the proposed reassessment and if the said respondent passes an adverse order, then it can avail of the remedies of appeal and reference. On the merits, they have controverted the petitioner's assertion about the new unit set up for manufacturing sheet metal components. According to them, the petitioner did not produce any evidence to substantiate its claim for deduction under Section 80I and when the true facts came to the notice of respondent No. 2, he issued notice under Section 148.
6. Shri A.K. Mittal argued that the impugned notice should be declared illegal and quashed because it amounts to an abuse of the power vested in respondent No. 2 to reopen the proceedings of assessment. He submitted that no material was available before respondent No. 2 on the basis of which he could believe that income of the petitioner had escaped assessment. Shri Mittal pointed out that the petitioner had placed all the documents before the Assessing Officer in the proceedings under sections 143 and 154 of the Act and, therefore, it cannot be said that there was any concealment of the relevant facts from the Assessing Officer resulting in escapement of income.
7. Shri R.P. Sawhney reiterated the objection raised to the maintainability of the writ petition and argued that the same should be dismissed because the petitioner has failed to avail of the statutory alternative remedies. He further argued that the reasons assigned by respondent No. 2 for forming a belief that the petitioner's income had escaped assessment do not suffer from any legal infirmity. Shri Sawhney submitted that at this stage, the court cannot go into the merits of the reasons assigned by respondent No. 2 and if the petitioner feels aggrieved by the ultimate order which may be passed by the competent authority, then it can avail of the remedies available under the statute.
8. We have given serious thought to the respective arguments. In our opinion, the petitioner has failed to make out a case for quashing the impugned notice on the ground of non-application of mind or on the ground that no material was available before respondent No. 2 which could be relied upon for forming a belief that income of the petitioner had escaped assessment or that the benefit could not have been given to it under Section 80I of the Act. It is settled law that the High Court cannot quash the notice issued under Section 148 unless it comes to the conclusion that the competent authority did not have any material whatsoever before him on the basis of which he could form a belief that the income of the assessee had escaped assessment.
9. In Phool Chand Bajrang Lal v. /TO [1993] 203ITR 456, their Lordships of the Supreme Court interpreted Section 147 of the Act and observed as under (page 477) :
"From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer, at the time of making the original assessment, could or could not have found by further enquiry or investigation, whether the transaction was genuine or not if, on the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment. .. . One of the purposes of Section 147 appears to us to be to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would be a travesty of justice to allow the assessee that latitude." (underlining is ours)
10. In Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34, their Lordships of the Supreme Court rejected the challenge to the notice issued for reassessment by observing that at that stage, the court can only consider whether there is a prima facie case for reassessment and reopening of the proceedings cannot be struck down by going into the sufficiency or correctness of the material relied upon by the assessing authority for that purpose.
11. A perusal of the reasons recorded by respondent No. 2 shows that he had applied his mind to the relevant material and formed a belief that the petitioner had not disclosed complete facts which could enable it to claim deduction under Section 80I and, therefore, its income had not been properly assessed. At this stage, the court can neither go into the sufficiency or adequacy of the reasons recorded by respondent No. 2 nor can it interfere with the notice simply because on an overall reappraisal of material, a different opinion may be formed.
12. For the reasons mentioned above, we hold that the petitioner has failed to make out a case for quashing the impugned notice.
13. Hence, the writ petition is dismissed.