Madras High Court
The Deputy Commissioner Of Income Tax vs K.S.Suresh on 21 July, 2009
Author: F.M.Ibrahim Kalifulla
Bench: F.M.Ibrahim Kalifulla
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.07.2009 CORAM: THE HONOURABLE Mr. JUSTICE F.M.IBRAHIM KALIFULLA and THE HONOURABLE Mr. JUSTICE B.RAJENDRAN Writ Appeal Nos.766 to 771 of 2005 W.A.No.766 of 2005 The Deputy Commissioner of Income Tax Company Circle VI(1), Chennai. ... Appellant Vs. K.S.Suresh ... Respondent Writ Appeal is filed under clause 15 of the Letters Patent praying for the relief stated therein. ----- For Appellant in all appeals : Mr.T.Ravi Kumar For respondents in all appeals : Mr.R.Krishnamoorthy, Senior Counsel for Mr.P.J.Rishikesh ---- COMMON JUDGMENT
(Judgment of the Court was made by F.M. Ibrahim Kalifulla, J.) The Revenue has come forward with these appeals challenging the order of the learned singe Judge dated 31.3.2005, passed in W.P.Nos.10607, 10608, 10628 to 10631 of 2005. There were three sets of writ petitions filed by three assessees and the challenge in the writ petitions was to identical notices issued under Section 148 dated 18.11.2004 and orders passed under Section 281B of the Income Tax Act (hereinafter referred to as 'the Act') dated 25.11.2004. As the impugned orders are identical in nature, for the sake of convenience, we refer to the impugned notices and the connected proceedings in relation to the petitioner in W.P.Nos.10607 and 10608 of 2005, the orders of which are the subject matter of challenge in W.A.Nos.766 and 767 of 2005.
2. The writ petitioner was issued with a notice dated 18.11.2004, under Section 148 of the Act calling upon him to file return of income in the prescribed format for the assessment year 2000-01, as the assessing authority had a 'reason to believe' that his income in respect of the said assessment year chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. Closely followed by that, by an order dated 25.11.2004, purported to have been passed under Section 281B of the Act, the deposits held by the writ petitioner in the Union Bank of India, T.Nagar, Chennai 600 017 under Capital Gain Scheme (in short 'CGS') to an extent of more than Rs.15 crores, was provisionally attached. The said order came to be passed with the approval of the Commissioner of Income Tax. In pursuance of the notice issued under Section 148, the first respondent herein, viz., the writ petitioner filed his return of income along with the statement. In the schedule filed along with the said statement, it was specifically claimed, as regards the alleged escaped income, as provided from sale of shares of S.S.I. Limited to the value of Rs.216,723,750.00. The details of the CGS deposits with the Union Bank of India with the amounts kept in deposit were also furnished. On behalf of the writ petitioner, his Auditors came forward with the letter dated 29.11.2004, calling upon the appellant to furnish a copy of the recording of reasons for reopening of assessment under Section 147 by relying upon a decision of the Hon'ble Supreme Court with reference to the provisional attachment order passed.
3. By another letter dated 29.11.2004, the Auditors while contending that the provisional attachment order under Section 281B was bad in law, requested to furnish the basis for quantification of the sum mentioned in the order of provisional attachment. On 7.12.2004, the appellant furnished a copy of the recording of reasons for reopening of assessment under Section 147. Thereafter, the Auditors of the assessee, in their letter dated 17.12.2004, sought for various statements said to have been recorded from various persons to be furnished in order to enable the assessee to file their objections against the reopening of the assessment. Thereafter, by letter dated 21.12.2004, the appellant informed the assessee that at the time of hearing of the case for completion of reassessment proceedings, copies of all materials and other evidences would be made available.
4. On behalf of the assessee, detailed objections were filed by their Auditors on 27.12.2004 raising as many as twelve objections and general submissions. In the said objections, it was ultimately contended that the assessing officer could not have had any 'reason to believe' that income liable to tax had escaped assessment, that therefore, the reassessment proceedings were not warranted or justified and that a speaking order should be passed. Subsequently, by letter dated 10.1.2005, the Auditors of the assessee filed their additional objections. The appellant, by its letter dated 10.2.2005, furnished the copies of statements taken from the Chief Manager of Union Bank of India, T.Nagar Branch and also the calculation of demand for attachment made in the provisional attachment order dated 25.11.2004 passed under Section 281B of the Act, as requested by the assessee. In the said communication, it was also stated that if there were any further submissions, the same should be submitted before 18.2.2005. On 18.2.2005, on behalf of the assessee, the Auditors again filed five more objections to the notice issued under Section 148/147 of the Act.
5. The appellant, by its order dated 21.3.2005, while rejecting the various objections in seriatim, concluded that the assessment proceedings for the assessment year 2000-01 have been validly reopened under Section 147 of the Act and the said order was passed after considering the objections submitted by the assessee, by a speaking order. It was at that stage, i.e. on 28.3.2005, the assessee filed the present writ petitions seeking to challenge the notice issued under Section 148 dated 18.11.2004 and the provisional order of attachment passed under Section 281B of the Act.
6. It is relevant to state that in the affidavit filed in support of the writ petitions, the assessee has specifically referred to the order dated 21.3.2005 rejecting the various objections raised by him and ultimately holding that the reassessment proceedings were validly made. While the writ petitions came up for admission on 31.3.2005, the same came to be straightaway allowed setting aside the notice issued under Section 148 dated 18.11.2004 as well as the consequential proceedings of provisional attachment dated 25.11.2004 passed under Section 281B by holding that the same would be without prejudice to the right of the appellant to issue fresh notice for reopening the assessment, if it is so advised, and also giving liberty to the assessees to submit their objections to the same, which should be considered by the appellant strictly in accordance with law as per the ratio laid down by the Apex Court, the Division Bench of this Court and other High Courts. In the said order, the learned single Judge has recorded the concession made by the learned Standing Counsel for the appellant, in paragraph Nos.8.1 to 8.3. Aggrieved against the said common order passed by the learned single Judge, the appellant has come forward with these appeals.
7. We heard Mr.T.Ravi Kumar, learned Standing Counsel for the appellant and Mr.R.Krishnamoorthy, learned Senior Counsel appearing for the respondents/assessees. Learned Standing Counsel, in his submissions, contended that before the learned Single Judge, the learned Standing Counsel never came forward to extend the concession to set aside the issuance of the notice under Section 148 of the Act and at that point of time when the writ petitions came up for admission, the learned Standing Counsel was not even aware of the development which had taken place after the issuance of the initial notice dated 18.11.2004, the other objections made and the ultimate order passed on 21.3.2005.
8. According to the learned Standing Counsel for the appellant, at the time of hearing of the writ petitions for admission, the learned Standing Counsel could not have made any concession with reference to the legal consequences in particular about the reassessment proceedings made under Section 147/148, the provisional attachment passed under Section 281B of the Act and in the said circumstances, any order passed based on such alleged concession would be contrary to the provisions of the statute. It was therefore contended that merely based on such alleged concession made on behalf of the learned Standing Counsel, the entirety of reassessment proceedings including the provisional attachment ought not to have been set aside. On merits, the learned Standing Counsel contended that there were enough materials available with the appellant, which would support the "reason to believe", for issuing the reassessment proceedings under Section 147/148 of the Act. The learned counsel relied upon very many decisions in support of his submissions.
9. As against the above submissions, Mr.R.Krishnamoorthy, learned Senior Counsel appearing for the respondents/assessees raised a preliminary objection that when once the learned single Judge passed orders based on the concession made by the learned Standing Counsel, the appellant cannot be allowed to challenge the said order by filing this appeal. The learned Senior Counsel, however, proceeded to make his submission on the merits of the case and contended that there could have been no "reasonable belief" for the appellant to initiate reassessment proceedings. The learned Senior counsel, therefore, contended that setting aside the impugned proceedings by the learned single Judge was well justified and the same does not call for interference. The learned Senior Counsel placed reliance upon various decisions in support of his submissions.
10. Having heard the learned Standing Counsel for the appellant and the learned Senior Counsel for the respondents and after having perused the various materials placed before us as well as the order of the learned single Judge, at the outset, we wish to deal with the submissions made with regard to the concessions said to have been made by the learned counsel for the appellant. The concession said to have been made by the learned Standing counsel have been recorded by the learned single Judge in paragraph Nos.8.1 to 8.3, which reads as under:-
"8.1. Mrs. Pushya Sitaraman, learned counsel taking notice on behalf of the respondent fairly concedes that the objections of the petitioners made on 27.12.2004, 10.02.2005 and 18.12.2005 were not considered by the respondent, while concluding that the assessment proceedings for the assessment year 2000-01 have been validly re-opened under section 147 of the Act by proceedings dated 21.03.2005.
8.2. Learned counsel for the respondent also concedes that the respondent has committed an error apparent on the face of the record by pre-determining the issue, while holding that it is a fit case for levy of penalty under Section 271(1)(c) of the Act, even while giving opportunity to the petitioners in his proceedings even dated 10.02.2005 to submit their objections on or before 18.02.2005 with regard to re-opening of the assessment for the assessment year 2000-01 and before deciding the matter on merits.
8.3. However, the learned counsel for the respondent seeks liberty to issue fresh notices to the petitioners and to proceed in accordance with law, if it is so proposed by the respondent."
11. Before considering the respective submissions of the learned counsel, we feel it appropriate to refer to certain decisions of the Hon'ble Supreme Court on the issue of concession made by the learned counsel before the Court and its implication in deciding the case. In the decision reported in AIR 1998 S.C. 465 (Tripura Goods Transport Association v. Commissioner of Taxes), the Hon'ble Supreme Court has held as under:-
"4. ... The concession made on behalf of the State counsel was against the statutory provisions and was unauthorised. It has been submitted that order passed on the basis of this erroneous concession should be recalled.
9. The assurance given by the counsel of the State in Court was "whether the applicants are dealers or not, he assures that if and when the applicants approach the Commissioner of Taxes, he shall ensure that these forms are supplied to the petitioners." This assurance was clearly against the law. Form 18A cannot be issued to the transporters.
10. Although the order dated 3-3-1997 was based on the assurance given by the Senior Advocate appearing for the State the order will have to be recalled. An advocate appearing on behalf of the State cannot undertake that the State will do something contrary to the statute. Therefore, this application is allowed. We will recall the order passed on 3-3-1997 and restore the I.A.2 of 1996 for hearing and disposal. These applications are disposed of as above. There will be no order as to costs."
Again, in the decision reported in AIR 1998 SC 1681 (Uptron India Ltd. v. Shammi Bhan), the Supreme Court has stated the legal position as under:-
"23. In view of this observation, the question whether the stipulation for automatic termination of services of overstaying the leave would be legally bad or not, was not decided by this Court in the judgement relied upon by Mr.Manoj Swarup. In that judgment the grounds on which the interference was made were different. The judgment of the High Court was set aside on the ground that it could not decide the disputed question of fact in a writ petition and the matter should have been better left to be decided by the Industrial Tribunal. Further, the High Court was approached after more than six years of the date on which the cause of action had arisen without there being any cogent explanation for the delay. Mr.Manoj Swarup contended that it was conceded by the counsel appearing on behalf of the employee that the provision in Standing Orders regarding automatic termination of services is not bad. This was endorsed by this Court by observing that "Learned counsel for the respondent rightly made no attempt to support his part of the high Court's order." This again cannot be treated to be a finding that provision for automatic termination of services can be validly made in the Certified Standing Orders. Even otherwise, a wrong concession on a question of law, made by a counsel, is not binding on his client. Such concession cannot constitute a just ground for a binding precedent. The reliance placed by Mr.Manoj Swarup on this judgment, therefore, is wholly out of place." (Emphasis added) In the decision reported in AIR 2001 SC 2306 (Central Council for Research in Ayurveda and Siddha v. K. Santhakumari), the legal position has been set out in paragraphs 12 and 13, which is to the following effect:-
"12. In the instant case, the selection was made by Departmental Promotion Committee. The Committee must have considered all relevant facts including the inter-se merit and ability of the candidates and prepared the selects list on that basis. The respondent though senior in comparison to other candidates, secured a lower place in the select list, evidently because the principle of "merit-cum-seniority' held been applied by the Departmental Promotion Committee. The respondent has no grievance that there was any mala fides on the part of the Departmental Promotion Committee. The only contention urged by the respondent is that the Departmental Promotion Committee did not follow the principle of 'seniority-cum-fitness'. In the High Court, the appellants herein failed to point out that the promotion is in respect of a selection post' and the principle to be applied is 'merit-cum-seniority'. Had the appellants pointed out the true position, the learned Single Judge would not have granted relief in favour of the respondent. If the learned Counsel has made an admission or concession inadvertently or under a mistaken impression of law, it is not binding on his client and the same cannot enure to the benefit of any party.
13. This Court in Uptron India Ltd. v. Shammit Bhan AIR 1998 SC 1681: (1998 AIR SCW 1447: 1998 Lab IC 1545: 1998 All LJ 1099) pointed out that a wrong concession on question of law made by counsel is not binding on his client and such concession cannot constitute a just ground for a binding precedent." (Emphasis added) In the decision reported in (2004) 3 SCC 628 (Union of India v. Mohanlal Likumal Punjabi), the Hon'ble Supreme Court has stated the legal position as under:-
"8. We shall first deal with the effect of concession, if any, made by learned counsel appearing for the present appellants before the High Court. Closer reading of the High Court's order shows that the High Court took the view that in view of the revocation of the order on 19-12-1994 and the order passed by the High Court on 11-1-1995, no further order could have been passed under Section 7 of the SAFEMA. After having expressed this view, the so-called concession is recorded. In our view the concession, if any, is really of no consequence, because the wrong concession made by a counsel cannot bind the parties when statutory provisions clearly provided otherwise. It was observed by a Constitution Bench of this Court in sanjeev Coke Mfg. Co. v. Bharat Coking Coal ltd. that courts are not to act on the basis of concession but with reference to the applicable provisions. The view has been reiterated in Uptron India Ltd. v. Shammi Bhan and Central Council for Research in Ayurveda & Siddha v. Dr. K. Santhakumari. In para 12 of Central Council case it was observed as follows: (SCC p.64, para.12)......
9. In Uptron India Ltd. v. Shammi Bhan, it was held that a case decided on the basis of wrong concession of a counsel has no precedent value. That apart, the applicability of the statute or otherwise to a given situation or the question of statutory liability of a person/institution under any provision of law would invariably depend upon the scope and meaning of the provisions concerned and has got to be adjudged not on any concession made. Any such concessions would have no acceptability or relevance while determining rights and liabilities incurred or acquired in view of the axiomatic principle without exception, that there can be no estoppel against statute." (Emphasis added) Again, in the decision reported in AIR 2006 SC 3566 (Union of India v. S.C. Parashar), the Hon'ble Supreme Court has held as under:-
"11. Before adverting to the said question we may record that wrong concession of a counsel on a pure question of law is not binding upon a party. It is furthermore trite that non-mentioning or wrong mentioning of a provision in an order may be held to be irrelevant if it is found that the requisite ingredients thereof were available on records for passing the same. We may further notice that the High Court proceeded on the basis that the penalty imposed upon him was a major penalty.
13. However, there cannot be any doubt whatsoever that the Disciplinary Authority never intended to impose a minor penalty. The concession of the learned counsel appearing for the appellant before the High Court was apparently erroneous. It is now well-settled that wrong concession made by a counsel before the court cannot bind the parties when statutory provisions clearly provide otherwise." (Emphasis added)
12. In fact, Mr.R.Krishnamoorthy, learned Senior Counsel appearing for the respondents/assessees also referred to the decisions reported in (i) (2004) 10 SCC 598 (Ram Bali v. State of U.P.), (ii) AIR 2003 SC 2418 (Roop Kumar v. Mohan Thedani) and (iii) AIR 1982 SC 1249 (State of Maharashtra v. Ramdas Shrinivas Nayak).
13. In the decision reported in 2004 10 SCC 598, the Hon'ble Supreme Court, in paragraph 9 of the said judgment, has held that where the High Court has specifically recorded to the effect that only two points were urged before it, in order to ascertain as to what transpired in the Court, the record in the judgment of the Court should be taken as a conclusive proof and no one should be allowed to contradict such statement on an affidavit or by other evidence. It was further held that if a party wanted to take a stand that what was recorded was erroneous, the party should approach the concerned Court for making any rectification and it is not open to the party to contend contrary to what has been recorded before the Hon'ble Supreme Court.
14. In the decision reported in AIR 2003 SC 2418, it was again reiterated in paragraph No.11 that it is not open to a party to turn around and take a plea that no concession was given. which would amount to a case of sitting on the fence, which should not be encouraged. It was again stated that if really there was no concession, the only course open to the party was to move the concerned Court and not by approaching the appellate court.
15. In the decision reported in AIR 1982 SC 1249, the Hon'ble Supreme Court, while reiterating the said position, however, carved out an exception, which reads as under:-
"4. Of course a party may resile and an Appellate Court may permit him in rare and appropriate cases to resile from a concession was made on a wrong appreciation of the law and had led to gross injustice; but, he may not call in question the very fact of making the concession as recorded in the judgment." (Emphasis added)
16. The principles that emerge from the above decisions are:-
a) Any concession made by a Counsel against the statutory provisions would be unauthorised and any order based on such erroneous concession should be recalled. (AIR 1998 SC 465);
b) A wrong concession on a question of law made by a counsel is not binding on his client. Such concession cannot constitute a just ground for a binding precedent. (AIR 1998 SC 1681);
c) If the learned counsel has made an admission or concession inadvertently or under a mistaken impression of law, it is not binding on his client and the same cannot enure to the benefit of any party;
d) Courts are not to act on the basis of concessions but with reference to the applicable provisions;
e) Any concession would have no acceptability or relevance while determining the rights and liabilities incurred or acquired in view of the axiomatic principle without exception, that there can be no estoppel against statute;
f) Any wrong concession made by a counsel before the Court cannot bind the parties when statutory provisions clearly provide otherwise;
g) A party may be allowed to revile and an Appellate Court may permit in rare and appropriate cases to resile from a concession made on a wrong appreciation of the law and had led to gross injustice though one may not call in question the very fact of making the concession as recorded in the judgment.
17. In the decision reported in AIR 1998 SC 1681, it has again been reiterated that a wrong concession on a question of law made by a counsel is not binding on his client and such concession cannot constitute a just ground for a binding precedent. It was pointed out therein that if the appellant in that case had pointed out the true position, the learned single Judge would not have granted relief in favour of the respondent. It was further held that if the counsel had made an attempt to give concession inadvertently or under a mistaken impression of law, it would not be binding on the client and the same cannot any how benefit any party. The said decision was followed again by the Hon'ble Supreme Court in the decision reported in AIR 2001 SC 2306. In the decision reported in (2004) 3 SCC 628, the Hon'ble Supreme Court had gone one step further and has held that applicability of the statute or otherwise to a given situation or the question of statutory liability of a person/institution under any provision of law could invariably depend upon the scope and meaning of the provisions and has got to be adjudged not on any concession; that any such concessions would have no acceptability or relevance while determining the rights and liabilities incurred or acquired in view of the axiomatic principle that there can be no estoppel against the statute.
18. A cumulative consideration of the above principles set out in the various decisions would make it clear that in the normal course, a party who made a concession in one Court cannot be allowed to resile from it in the appellate court, but yet, under certain exceptional circumstances, when such concessions came to be made on a wrong appreciation of law which had led to gross injustice, then in such cases, the appellate court can permit in appropriate cases to resile from a concession on such exceptional grounds. The established legal position, however, remains that there can never be a concession made at the instance of the counsel on a wrong appreciation of law on the principle that there can never be an estoppel against the statute. In fact, in the decision of the Hon'ble Supreme Court reported in AIR 2001 SC 2306, it is made clear that an admission or concession by a counsel made inadvertently or under a mistaken impression of law will not only bind on his client, but also the same cannot enure to the benefit of the other party.
19. Keeping the above legal principles in mind, when we examined the so-called concession said to have been made by the learned Standing Counsel for the appellant, in the first place, it will have to be stated that it is not the case of the appellant that the learned Standing Counsel did not make any concession at all. The learned Standing Counsel appearing for the appellant only contended before us that in the order dated 10.2.2005, while furnishing the copies of the statement of the Manager of the Bank and the details of the figures mentioned in the order of provisional attachment, a statement has been made to the effect that it was a fit case for levy of penalty under Section 271(1)(c) and that if minimum amount of penalty is levied, it will work out to Rs.5.8 crores, which statement in all fairness could not have been made at that stage. We, however, proceed on the premise that the concession as recorded by the learned single Judge was made at the time of passing of the order impugned in these appeals. However, for the reasons to be stated that while dealing with the merits of the issue raised in the writ petitions, we are of the considered opinion that such a concession given, would not bind the appellant as, such concession would run contrary to the relevant provisions relating to issuance of notice under Section 148/147 of the Act.
20. Apart from the said position, even if such concession is taken to be true, the same does not correctly reflect the factual situation inasmuch as the so-called concession as recorded by the learned single Judge was stated to be on the basis of various objections raised by the assessee made on 27.12.2004, 10.02.2005 and 18.02.2005, which according to the respondents, were not considered in the order dated 21.3.2005. On the contrary, the order dated 21.3.2005 runs to as many as nine pages and a cursory glance of the said order discloses that there were consideration of the objections in seriatim in the said order. Moreover, for issuing the proceedings under Section 147/148 of the Act, the relevant criteria to be seen is as to whether there was a 'reasonable belief' available for the assessing authority for making a reassessment. Unfortunately, the said legal requirement, with reference to issuance of reassessment proceedings, was never considered nor examined as to whether the concession made by the learned counsel would cover such a legal principle relating to issuance of reassessment proceedings. If that be so, applying the settled legal position that based on a wrong concession on question of law made by a counsel, the same will not bind the party, the so-called concession, cannot be the basis to interfere with the proceedings impugned in the writ petitions.
21. The concession said to have been made by the learned standing counsel as recorded by the learned Judge in para 8.1 is to the effect that the objections of the writ petitioner made on 27.12.2004, 10.02.2005 and 18.12.2005 were not considered by the appellant. The said statement is contrary to the actual facts. A perusal of the proceedings dated 21.03.2005 disclose that every one of the objections raised by the writ petitioners were considered threadbare before expressing the decision to make a reassessment. Moreover, when, the writ petition was moved for admission, it is not known how the learned counsel could have expressed any such concession without even referring to the order dated 21.03.2005. It can only be said that such a concession as recorded by the learned Judge can only be construed as one made inadvertently and not in consonance with law. Further, when a detailed exercise was carried out by the appellants in dealing with the notice issued by it under Section 148 of the Act, and when very serious consequence would follow in pursuance of such a notice, as held by the Hon'ble Supreme Court, Court cannot act by merely based on the concession of a counsel, but should examine the feasibility of granting any relief or pass any order by making a detailed reference to the legal principles and the relevant provision of law or otherwise it would run counter to the well established principle that there can be no estoppel against a Statute. Moreover such a concession being contrary to the real facts, will have to be taken as a wrong one and on this score also it cannot bind the appellant. In any event, in our considered opinion, in view of the special facts involved and demonstrated before us with reference to the initial order dated 18.11.2004, the subsequent correspondence exchanged between the writ petitioner and the appellant, which ultimately culminated in the order dated 21.03.2005 it will be travesty of justice if the efforts taken by the appellant in initiating the reassessment proceeding were to be set at naught in such a cursory manner by relying upon the said concession of the learned counsel. We are therefore convinced that the appellant should be allowed to resile from the concession said to have been made by the learned counsel or otherwise it will result in gross injustice. In our considered opinion, having regard to the legal effect of Section 148 notice dated 18.11.2004 and the consequent developments that had taken place in which, the writ petitioner have travelled to a very long distance, it is a fit case where, the appellant should be permitted to contest the writ petition on merits and examine the claim of the writ petitioner in making a challenge to the said notice.
22. As far as the so-called over statement said to have been made with reference to Section 271(1)(c) of the Act, about which the learned Standing Counsel is stated to have made a concession, it can be safely held that at that stage, even assuming that such an excess statement found in the order dated 10.2.2005 was uncalled for, the same cannot in any way whittle down the effect of Section 148 notice or provide any valid ground for interfering with the notice issued under Section 148 of the Act, unless it is held that there was no basis for the 'reasonable belief' for issuance of the said notice.
23. At this juncture, it is necessary to refer to the conduct of the respondent/assessee in having moved the writ petitions before the learned single Judge. A perusal of the affidavit filed in support of the writ petition discloses that on the date when the writ petition was filed (i.e) on 28.3.2005, the assessee was furnished with a copy of the order dated 21.3.2005 rejecting all his objections and the decision to proceed with the reassessment under Section 147 of the Act. In fact, in more than one place, the assessee made a reference to the said order dated 21.3.2005 i.e. in paragraph Nos.10, 13 15 and 18 and in ground No.2 Of his affidavit filed in support of the writ petition. In fact, in ground No.2, the assessee would go to the extent of saying that the order dated 21.3.2005 was not in accordance with the jurisdiction vested with the appellant under Section 147 as declared by various High Courts. Nevertheless, it is not known for what reason the assessee has chosen not to seek for setting aside the order dated 21.3.2005, instead, was satisfied with the challenge to the preliminary notice dated 18.11.2004 and the provisional order of attachment passed under Section 281B of the Act. If really the assessee was aggrieved, such grievance could have been only with reference to the ultimate order of rejection dated 21.3.2005. As stated earlier, the various averments contained in the affidavit of the assessee, wherever reference has been made to the order dated 21.3.2005, the assessee has specifically referred to his grievance relating to the said order. Nevertheless, while challenging the preliminary notice dated 18.11.2004, the assessee, for reasons best known to him, has not chosen to challenge the order dated 21.3.2005. In such circumstances, we only express our anguish that the assessee did not come before the Court with bona fide intentions, but with a view to abuse the process of this Court, by seeking a challenge only to the preliminary notice dated 18.11.2004, while the final order had been passed on 21.3.2005. For the above stated reasons, we are convinced that there was every justification in the stand of the appellant in seeking to consider the issues on merits and contend that the assessee cannot be granted any relief in the writ petition. The learned Senior Counsel, who appeared for the respondent/assessee, was also fair enough to argue the case on merits apart from addressing arguments based on the concession alleged to have been made by the learned Standing counsel.
24. As far as merits of the case is concerned, we do not find any merit at all in the case of the assessee while seeking to challenge the preliminary notice dated 18.11.2004. When we make a reference to the various proceedings commencing from the issuance of the notice dated 18.11.2004, we find that after receipt of the said notice, the assessee filed the return of income in compliance with the demand made in the notice dated 18.11.2004. The return of income was filed on 21.11.2004 along with the statement of total income, tax particulars and the balance sheet as on 31.03.2000.
25. Before delving deep into the issue, which resulted in the issuance of the notice under Section 148, it would be worthwhile to state briefly the circumstances which necessitated the appellant to issue notice under Section 148 of the Act. According to the appellant, there was a sale of shares of the assessee's company, viz., SSI Limited, in which assessees were the promoters themselves. The total number of shares in respect of the petitioners were around 2,34,000/-. The allegation was that the assessees sold those shares on 22.10.1999 to third parties namely, Mr.S.Venkatesh, Ms.V. Kalai Selvi and Mr.K.V.Prakash at the rate of Rs.805/- per share. The said sales were said to have been made by way of off-market/spot sales. Subsequently, those three individuals, viz., Mr.K.V.Prakash, Ms.V. Kalai Selvi and Mr.K.V.Prakash sold their shares between 27.10.1999 and 02.03.2000 in different units and the rates varied between Rs.880/- and Rs.6640/-. The subsequent sale by those three individuals was stated to have been made through M/s.Triumph International and M/s.Ananth Securities. While the assessee had sold their shares as early as on 22.10.1999 to third parties, and those third parties had in turn sold them on different dates between November 1999 and March 2000, the receipts of the sale consideration of those three individuals were admittedly reflected in the accounts of the assessee, which according to the appellant had escaped assessment and necessitated the issuance of notice under Section 148 for making reassessment.
26. A perusal of the order dated 21.03.2005, discloses the following factors viz.,
(i) The assessee filed return of income for the assessment year 2000-01 on 31.10.2000, declaring a total income of Rs.4,76,20,370/-.
(ii) The said return was processed under Section 143(1) on 13.03.2002.
(iii) In the return, the assessee showed sale consideration from the sale of long term capital assets viz., 74,000 shares of SSI Ltd., for a total sum of Rs.21,74,63,750/-.
(iv) Exemption under Section 54EA was claimed based on deposit of Rs.18 crores with Union Bank of India on 28.03.2000, by which the exempted claimed was Rs.17,90,15,914/-.
(v) Copy of FDR receipt disclosed the deposit for 36 months from 09.03.2000.
(vi) Income Tax Department received a report from SEBI in August, 2004 pointing out the first sale by the assessee in October, 1999 of 75,000 shares at the rate of Rs.805/- per share in the off-market deal.
(vii) SEBI report also disclosed the subsequent sale by the purchasers between 22.11.1999 to 27.01.2000 at the market price ranging from Rs.1284/- per share to Rs.4366/- per share through regular stock brokers.
(viii) The details of those transactions were not disclosed by the assessee in the return of income. If it had been disclosed, the question as to whether the capital gains were to be construed as long term capital gain or short term capital gain or partly long term or partly short term capital gain would have been known.
(ix) If section 54EA is applied for claiming exemption from payment of capital gain tax, the investment should be made only in specified securities and the deposits with scheduled banks was not a specified security under Section 54EA.
(x) Notice under Section 154 was issued to disallow the claim under Section 54EA on 09.09.2004.
(xi) Assessee's representative filed a letter dated 17.09.2004, stating that it was wrongly claimed under Section 54EA instead of Section 54EB of the Act.
(xii) The method of calculation filed along with the return of income was as prescribed under Section 54EA(i)(b) of the Act.
(xiii) After the issuance of notice under Section 148, at the stage of filing of the return in response to the said notice, the respondent changed the method of computation of capital gains by following the method specified under Section 54EB(1)(b).
(xiv) For the first time, after issuance of Section 148 notice, Bank Manager's letter dated 30.03.2000 was filed on 17.09.2004, stating that deposit for capital gains scheme should be kept for a period of seven years; that during that period no lien or loan can be availed on the security; that three years deposits would be re-designated under Section 54EB for a period of seven years. That letter was suppressed at the time of filing of the original return though the return was filed on 01.11.2000.
(xv) That the Income Tax Department called upon the Chief Manager of the Bank to furnish the details of the deposits on 18.08.2004. The bank furnished the information on 19.08.2004, stating that the capital gain scheme deposits were closed on 09.03.2003. Though by subsequent letter dated 17.09.2004, it was stated that the deposits were still held by the bank.
(xvi) The bank also informed that after closing the accounts, the funds were transferred to open two new FDR accounts for a period of three years and the interest from earlier deposit was withdrawn by the assessee on a monthly basis.
(xvii) One of the FDRs in FDR A/c. No.2854 was offered by the assessee as security for his O.D. facilities with the bank.
(xviii) All the above information came to light only in the month of August 2004.
(xix) The conduct of the assessee in closing the renewed deposit after three years and availing O.D. on renewed Fixed Deposit showed that the assessee did not act on the Bank Manger's letter dated 30.03.2000.
27. In fact, after the filing of the return of income on 29.11.2004, on behalf of the assessee, a requisition was made to furnish copy of the recording of the reasons for reopening of the assessment under Section 147 and such a requisition was made on 29.11.2004. On 17.12.2004, a detailed note furnishing the reasons was forwarded to the assessee. In the said note, the various deficiencies in the matter of sale and resale of very same set of shares was pointed out and it was also stated therein as to how such clandestine transaction came to the knowledge of the appellant through SEBI, which resulted in the issuance of the notice under Section 148 of the Act for reopening of the assessment under Section 147 of the Act.
28. Subsequently, when on behalf of the asssessees, the relevant materials relied upon for issuance of the notice under Section 148 were called for in the letter dated 17.12.2004, sent on behalf of the assessee, a stand was taken that there could have been no valid reason to believe that the income liable to tax had escaped assessment and that opportunity should be given to file their objections. The opportunity was extended and a very detailed objection came to be made on behalf of the assessee on 27.12.2004. In the said objections, on behalf of the assessee, it was stated that there was no valid reason to believe that the income liable to tax had escaped assessment, and therefore, the proceeding should be dropped. There were additional objections raised on behalf of the assessee on 10.01.2005. Subsequently, on 10.02.2005 the appellant furnished the statement of the Chief Manager, Union Bank of India, T.Nagar, Chennai, who was examined by SEBI. Further, objections were raised on 18.02.2005 running to several pages.
29. At this juncture, it would be worthwhile to refer to some of the statements made by the Chief Manager of Union Bank of India, which would throw much light as to the extent of alleged clandestine transactions indulged in by the assessee. On the one hand, while there was a prima-facie basis for the alleged clandestine deal indulged in by the assessees in the matter of disposal of the shares of SSI Limited, bank records with regard to the deposit made under the Capital Gain Scheme, disclosed further striking deficiencies in the handling of those receipts which were contrary to the statutory provisions. To cite one instance, in the Statement of the Manager himself, when a specific question was put to the Manager with reference to the CGS deposit accounts, the answer made by the Chief Manager is sufficient to demonstrate the extent of illegality indulged in as alleged by the appellant in the impugned proceedings. The same are found in recorded statement of the Manager to questions 24 to 36, which are extracted hereunder:-
"Q.24: Can you state what is the period of these deposit accounts viz. 1658, 1659 & 1660?
Ans. These deposit accounts No. 1658, 1658 & 1660 have been placed for 36 months w.e.f. 9.3.2000.
Q.25: It seems from the Deposit Receipts & Vouchers that the date of deposit was 28.3.2000, whereas, effective date of deposit has been made from the date of 9.3.2000. Can you explain the reason?
Ans. I am not able to explain the reason.
Q.26: I am showing you photocopies of Fixed Deposit Receipt dated 4.4.2003 Account No. 2852 for an amount of Rs.12,50,00,000 & Account No.2851 [dated 4.4.2003] for an amount of Rs.3,50,00,000 in the name of K.S. Ganesh; FDR dated [4.4.2003] Account No.2850 for Rs.15,00,00,000 & FDR Account No.2859 (dated 4.4.2003) for Rs.3,50,00,000 in the name of Shri K.S.Agoram and FDR Receipt dated 4.4.2003 Account No.2853 for Rs.3,50,00,000 and Account No.2854 dated 4.4.2003 for Rs.14,50,00,000 in the name of Sri K.S.Suresh. These photocopies have been obtained from your branch. All these deposits are for a period of 36 months. I am also showing you the Ledger Account of all these FDRs obtained from your branch. From these, can you tell how these deposits were opened?
Ans: In the case of Sri. K.S.Aghoram, FDR Account Numbers 2850 & 2849 for an amount of Rs.15,00,00,000 and Rs.3,50,00,000, respectively have been opened by closing and transferring funds from CGS-FDR Account No.1659 which matured on 9.3.2003. In the case of Shri K.S.Suresh, FDR Account Numbers 2853 & 2854 for an amount of Rs.3,50,00,000 and Rs.14,50,00,000 have been opened by closing and transferring funds from CGS-FDR Account No.1660 which matured on 9.3.2003. Similarly, in case of Sri K.S. Ganesh, FDR Account Numbers 2852 for an amount of Rs.12,50,00,000 & Account No.2851 for an amount of Rs.3,50,00,000 were opened by closing & transferring funds from CGS-FDR Account No.1658.
Q.27 Would you have obtained Account opening forms for the above-referred FDR Accounts viz.2849, 2850, 2853, 2854, 2851 and 2852? Also, please explain why, in every case, these deposits have been split into two different amounts and renewed?
Ans. Yes. Normally, we would either obtain a fresh application form or use the old application form and obtain necessary instructions therein from the applicant/client for renewal. In any case, we will obtain some written request from the client for renewal or opening of FDRs. Similarly, splitting of deposits into various denominations at the time of renewal will also be done only under the specific request of the client.
Q.28 Can you produce copies of such written requests or applications, whichever the case may be, in respect of the FDR Account Nos.2849 to 2852?
Ans. Yes. We will produce such written requests on or before 22.11.2004.
Q.29 I am showing you copies of Secured Overdraft application forms dated 18.6.2004 of Sri K.S. Aghoram, Shri K.S. Ganesh and Shri K.S. Suresh, which are obtained from your branch. Please state what is the security on which the overdraft has been granted:-
Ans. In the case of Shri K.S.Aghoram, overdraft has been obtained by him on the security of FDR of Rs.15 Crores Account No.2850 dated 4.4.2003. In the case of Shri K.S.Suresh, overdraft has been obtained by him on the security of FDR of Rs.14.5 Crores account No.2854 dated 4.4.2003. In the case of Shri K.S.Ganesh, overdraft has been obtained by him on the security of FDR of Rs.12.5 Crores Account No.2852 dated 4.4.2003.
Q.30 From the above, do you confirm that the individuals Shri K.S.Aghoram, Shri K.S.Suresh & Shri K.S.Ganesh have taken loans on the security of capital gains scheme FDRs?
Ans. From the records, it appears that on the date of sanctioning of O.D. viz. 18.06.2004, loans have been given to the above-said three individuals on the security of normal FDRs Account Numbers 2852, 2850 & 2854.
Q.31 Does that confirm that the Capital Gains scheme-FDRs are no more existent, or, in other words, they have been converted into normal FDRs?
Ans. Yes.
Q.32 Please refer to your letter dated 19.8.2004 in response to this office letter u/s 133(6) of the Income Tax Act, 1961 wherein you have mentioned that CGS deposits 1669, 1668 and 1670 said to have been wrongly mentioned as 1659, 1658 and 1660, were withdrawn on 4.4.2003. What was the basis for that statement?
Ans. This Statement has been given based on records, the photocopies of which were obtained by you from our branch. Though it is mentioned in that letter dated 19.8.2004 that these deposits were withdrawn, it appears that these deposits were actually transferred to another account. I will verify the records and confirm the same tomorrow.
Q.33 Please refer to your letter dated 17.9.2004 wherein you have stated that due date of these capital gains scheme deposits in respect of Shri. K.S.Aghoram, Shri K.S.Ganesh and Shri K.S.Suresh was 9.3.2007 and that they are still held by the bank. This conveys that the said CGS-FDRs are still held in the same form by the bank and that they were actually deposited and maintained for 7 years i.e. till 9.3.2007, whereas, as explained by you in answer to the previous questions recorded today, these were not deposited for seven years and they are no more in the same form with the bank. Do you accept and confirm the same?
Ans. I accept and confirm that these deposits were not made for 7 years and they are not continuing in the same form in which they were made on 28.3.2000. Such an impression, that they were deposited for 7 years and have been continuing in same form, was created inadvertently in the above-referred letter dated 17.9.2004.
Q.34 It is seen from records that there has been some attempt on the part of the branch of Union Bank of India, T.Nagar, Chennai to remove the lien placed on the above-mentioned FDRs and re-classify them as capital gains scheme deposits. What is the basis & authority for the bank to carry out such an action?
Ans. The concerned party had taken the matter to the General Manager's office of the Bank. After discussions, a decision was taken and conveyed to us by the Office of the G.M. that the deposits may be renewed for a period of four years from 9.3.2003 so that technically the deposits would have been held for seven years. So, it was decided also to lift the lien on these FDRs.
Q.35 As of now, have the party offered any other security for the S.O.D. limit enjoyed by them?
Ans. It is still at the discussion stage and we may take some other security to cover the excess margin which results due to the release of lien on certain deposits.
Q.36 It is seen from the records that you have issued FDR Receipts under CGS on 22.9.2004 with a remark that 'this is in continuation of deposits No.1658, 1659 & 1660' in respect of the 3 Directors. What is the basis for issue of these CGS-FDRs? Is there any written request from the party?
Ans. As replied to an earlier query, the funds are with the bank in one form or other since 9.3.2000 and as per the instructions of our G.M., we issued the above CGS-FDRs. There is no written request from the party.
Q.37 Do you have anything else to say?
Ans. Nothing apart from what has been stated above."
(Sd/-) I have gone through the above statement which has been given by me without any threat or coercion and I find that the statement has been correctly recorded, as deposed by me.
(Sd/-) 18.11.2004"
30. With reference to said statement of the Bank Manager, while submitting every objection on 18.02.2005, what all was stated on behalf of the assessee was that of the Manager's statement, which could not be accepted without cross-examination. That apart, in the said statement of the Manager, there was no supporting material and that the General Manager, who is said to have given instructions to the Chief Manager, was not examined.
31. In consideration of the above materials, it will have to be stated without any hesitation that such materials, which were made available before the appellant, were sufficient to constitute reason to believe for the issuance of the notice under Section 148 of the Act. Apparently, for this reason, we are of the view that the respondent/assessee has deliberately chosen not to make a specific challenge to the order of the appellant dated 21.03.2005 wherein the various objections of the respondent/assessee were dealt with in extenso and rejected while deciding to proceed with the issuance of the reassessment proceedings.
32. We need not have to deliberate much based on various facts stated by the Chief Manager except quoting one fact about the manner in which the CGS account was dealt with by the Bank at the instance of the assessee. Under section 54EB, statutorily, any CGS deposit should be created for a period of 7 years and that such deposit should not be mulcted with any liability or lien during the said period of seven years. A reference to question No.29 and the answer by the Chief Manager disclose that in respect of Account No.2850, 2854 and 2852, over drafts were secured by all the three assesses. Similarly, a reference to question No.30 and the corresponding answer of the deponent disclose that based on the security of FDR Account Nos.2852, 2850 and 2854, loans were sanctioned and drawn by all the three assesses. This is apart from the fact that the deposits were not readily created for 7 full years at the initial stage itself. It was also highly doubtful whether the deposits were made in fulfilment of Section 54EA or 54EB. In fact, a perusal of the statement of the Chief Manager by itself would be sufficient to create necessary basis for the reason to believe to enable the appellant to proceed with the issuance of the notice under Section 148. In such circumstances, the order dated 21.03.2005 issued by the appellant rejecting the various objections raised on behalf of the assesses, in order to proceed with the reassessment based on the notice dated 18.11.2004, was perfectly justified.
33. As stated by us earlier, though the assessees chose to challenge the notice dated 18.11.2004 issued under Section 148 of the Act, they consciously took a decision not to challenge the ultimate order dated 21.03.2005. Therefore, while the order dated 21.03.2005 stands as a culmination to the issuance of the notice dated 18.11.2004, it was too late in the day for the assessees to have come forward with the writ petition challenging the initial notice dated 18.11.2004. In other words, much water had flown after the issuance of the notice dated 18.11.2004 i.e. the filing of the return of income on 29.11.2004, filing of objection at three different stages and the passing of the ultimate order dated 21.03.2005 it cannot lie in the mouth of the assesses in seeking to challenge the initial notice dated 18.11.2004 and thereby frustrate the whole proceedings. This is apart from the fact that there was every justification for the appellant to initiate the reassessment proceedings by issuing the notice dated 18.11.2004 and by passing the ultimate order dated 21.03.2005.
34. As far as the legal requirement for issuing a notice under Section 148 of the Act, what all the provisions mandate is that the assessing officer should have 'reason to believe' that any income chargeable to tax has escaped assessment for any assessment year. In this context, though very many decisions were relied upon by respective counsel we are of the view that the following decisions are sufficient to support the stand of the appellant viz., the decisions reported in (i)[1996] 221 I.T.R. 538 {Sri Krishna Pvt. Ltd., Vs. Income-Tax Officer and Others}, (ii)[2007] 291 I.T.R. 500 (SC) {Assistant Commissioner of Income-Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd.} and (iii) [2009] 311 I.T.R. 31 (Mad) {Income-Tax Officer Vs. K.M.Pachiappan}. (1999) 236 ITR 34 (Raymond Woollen Mills Ltd., v Income Tax Officer and Others)
35. So far as the decision reported in [1996] 221 I.T.R. 538 is concerned, it was a case which arose long prior to the present amended Sections 147 and 148 of the Income Tax Act. In fact, the provisions were still more stringent at that point of time, where, in order to proceed with reassessment, apart from the 'reason to believe', the requirement of and disclosure of material facts fully and truly which are necessary for the assessment which was omitted to be disclosed at the time of the assessment was also there. While dealing with the said provision, the Hon'ble Supreme Court held that where the Income Tax Officer found out while examining the assessment relating to the subsequent year certain loans were found to be bogus, has observed as under:-
"It is necessary to remember that we are at the stage of reopening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it is that the Income-tax Officer could have investigated the truth of the said assertion which he actually did in the subsequent assessment year but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. ...... Does it not furnish a reasonable ground for the Income-tax Officer to believe that on account of the failure indeed not a mere failure but a positive design to mislead of the assessee to disclose all material facts, fully and truly, necessary for his assessment for that year, income had escaped assessment? We are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under Section 148/147. The enquiry at this stage is only to see whether there are reasonable grounds for the Income-tax Officer to believe and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind." (Emphasis added)
36. Going by the above dictum as a proposition of law and applying the same to the facts of this case, we can safely state that the nature of transaction indulged in by the assesses in the transfer of shares at two different stages and make it appear as though there was one single transaction and the consideration and value of the shares having been received by way of single receipt and yet, sought to claim benefits in two different angles, which act of the assesses indulged in by them and which was not plainly disclosed at the time of original assessment and which came to the notice of the appellant through the report of the SEBI was sufficient for the present step viz., for the issuance of the notice under Section 147/148 to proceed with the reassessment proceedings.
37. In the decision reported in [2007] 291 I.T.R 500, the Hon'ble Supreme Court, after referring to Section 147/148, as it stood prior to its substitution by Direct Tax Laws (Amendment) Act, 1987), stated the legal provision as under:-
"16. ... At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction.
17. ... To confer jurisdiction under section 147(a) two conditions were required to be satisfied : firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso." (Emphasis added)
38. Therefore, applying the said legal position now as stipulated under Section 147/148 of the Act, it is not necessary for the appellant to establish to the entire satisfaction of the respondent reasonable belief based on which the notice came to be issued under Section 148. In fact, the Hon'ble Supreme Court has gone to the extent of saying that the confirmation of the belief by the assessing officer is within the realm of subjective satisfaction and what all to be satisfied is that there were enough materials to support the claim of reasonable belief, which persuaded the assessing officer to issue notice under Section 148 of the Act. The said decision was also followed by the Division Bench of our High Court in the case of Income-Tax Officer Vs. K.M.Pachiappan reported in [2009] 311 I.T.R 31. In the decision reported in Raymond Woollen Mills Ltd., v Income Tax Officer and Others (236 ITR 34), the Hon'ble Supreme Court reiterated the position that Court can only consider whether there was a prima facie case for reassessment, that sufficiency of materials or correctness of materials is not to be considered at that stage.
39. As far as the unreported decision of the Division Bench of this Court relied on by the respondents/assesses is concerned, it will have to be held that the said decision stands upon the peculiar facts involved therein. The Division Bench, after considering the facts pleaded therein, took the view that the Revenue failed to satisfy that the assessing officer had reason to believe for initiating the reassessment proceedings. As the said decision was based upon the special facts involved in that case, the same can have no application to the facts of this case.
40. In the decision reported in [1998] 231 I.T.R 200 , there again, the belief of the Income Tax Officer was based on letters written to appellant by the Department of Ministry of Finance imposing a bar on remittance under the provisions of the Act. The Hon'ble Supreme Court, after examining the contents of the documents, which were relied upon for initiating the reassessment proceedings, held in Paragraph 12 that in the two letters, there appears to be hardly a ground for the Income Tax Officer to reopen the assessment, and therefore, it cannot be held that there was a reason to believe for initiating the proceedings for reassessment. Here again, it turns upon the special facts in the said case. Similar are the other cases, which were relied upon by the learned Senior Counsel for the respondents/assessees.
41. In the light of the decisions of the Supreme Court, in having laid down the legal principles in such categoric terms, we do not find any justification at all in the stand of the assesses in having not approached this court seeking to challenge the proceedings dated 21.03.2005. In other words, the assesses having subjected themselves to the notice dated 18.11.2004 by submitting their return of income and thereafter submitting their objections at three different stages viz., the initial one after the receipt of the reasons furnished by the appellant, thereafter, after the receipt of the statement of the Manager of the Bank, and thereafter, the orders having been passed finally on 21.03.2005 and having chosen not to challenge the said proceedings, it was highly improper on the part of the assesses to have come forward with the present writ petitions in seeking to challenge the initial notice dated 18.11.2004 alone by merely contending that such objections were not duly considered by the appellant.
42. In fact, in the decision reported in 236 I.T.R 34, the Hon'ble Supreme Court has held that the Court can only consider whether there was a prima facie case for re-assessment and sufficiency of materials cannot be considered at that stage. The Supreme Court also pointed out that sufficiency or correctness of the material even after reopening cannot be challenged at that stage; that the assessee will always have the right to prove that the assumption of facts made in the notice was erroneous and that no new facts came to the knowledge of the income tax officer after completing all the proceedings and that such ultimate order passed in the reassessment proceedings can be challenged in accordance with law.
43. In the light of the above legal position, we are constrained to state that the assesses have adopted a sinister motive in challenging the notice under Section 148 of the Income Tax Act and thereby thwarted the reassessment proceedings till this date. Therefore, we find no justification at all in the attempt of the respondents/assessees in having approached this court the manner in which it was done and hence, we have no hesitation to hold that exemplary costs should be awarded as against the assessees while allowing these writ appeals. 44. In such circumstances, the writ appeals deserve to be allowed and the order dated 31.3.2005 passed by the learned single judge is set aside. While allowing the writ appeals, we impose a cost of Rs.10,000/- (Rupees ten thousand only) on each of the writ petitioners, to be payable by the respondent/assesses to the appellant/Revenue. Accordingly, the writ petitions are dismissed. The undertaking recorded in the interim order dated 15.4.2005, shall continue to operate pending further orders to be passed by the assessing authority. However, in the circumstances of the case, there shall be no order as to costs.
gs To The Deputy Commissioner of Income Tax, Company Circle VI(1), Chennai