Karnataka High Court
Sri P Dayananda Pai vs The Assistant Commissioner Of Income ... on 1 July, 2011
Bench: Manjula Chellur, B.V.Nagarathna
IN THE} BIG}: CQURT as KARNATAKA AT BANGALORE
DATED THIS THE 18"? DAY OF JULY: 20;
PRESENT
THE HONBLE2 MRS. JUSTICE MANJULA "
THE HONBLE MRS. JUSTICE}B:V,NAG1§R.?;TfiN§5;
I.T.A. No§4§8 2oo3;._ z
BETWEEN: V' K
SRLPDAYANANDA PAI ,
N085/1, SHI\75iSHAI{_Ti"'» . é
K.H.ROAD ''
BANGA[.ORJ:1§ .. 2 :2 T ...APF£LL%i'*f?'
(By 511; 2}\;d§%';7--ész-- MALAVA, Adv.)
AND: " '
THE Ass"1s.TANT'<:OMivHss10NER
OF INCOME TAX'(IN\/C)
C:R«<?LE'1 (13 .....
. TUN;TY~'ABU1'LQ1NGANNEX
» 1V\/'HSVSE-QNTRQAD
RESPONDENT
(Bf;Sr};-?fl:.vVv'.SESHACHALA, Adv.)
*>f<>!<>i<*=§<>§<$Ei'
This I6T€A is filed u,/s. 260A of the Income Tax Act,
1961 arising out of order dt, 12.5.2003 passed in ETA N3.
E35?/Bang/1998 for the assessment year 1991~92 praying
u "that this Hoxfble Court may be pleased to fsrmulajte the
sui:)si:amii22_i e:}ussiion of law staied absvs ant': afiow The
appeal and seteasids the €)I"d€I' sf éhs Tribunai bearing ETA
No. 35'?/Bang/1998 éated 12.5.2003 on The validity of
asssssmszzé; for The asssssmsnz'; year }.Q9E~92 and Gm,
5
/~ g
This ETA. being reserved and Coming on far
pranouneement of judgment this Say, Nagaratfi.-na J2,
delivered the foflowing: V
JUDGMENT
This appeal filed under Sfséfiorx fix; éi1e<v$m6bf\ Tax Act, 1961 (hereinafter, ref»e3fredV_TA"£:0 e.s._ th.e , against the order dates 5/ZEOQ3; is ITA V No.357/ Bang,' 98 by the In-e--0V1efie_ Appellaie Tribunal, Bangalore Bench, (he1;e§1?:e¢1"t'e:j§,t g'».;wr:Vs the "Tribunai").
2. On' / this? was admitted to Consider {she is'fii;sia:itie1».§qi:estions of 1aw:~ """ R5/7.9. the facts and "~.Acirc4LLn':9::fazii ce:Aoféviisaevtezse, is the Tribunai right in law in e0Vi':cliisi1i1g"'that the assessment is not bad . A, in Zita} 'whe,rz '- tfie Assessing Ofiieer had no ;jL£z'i;S_diCti('}?'L'v*«-Eff,'" issue the second notice under A * .. 'V _VvAs'eCtf.er:. 2_ 48 of Income-tax Act ? Whether on the facts and in the ' , V'§CifeVLé4rr2stcznees cf the case, was the Tribunai vfegaiiy justified in holding that the second notice under section 348, dated 24.2Z.E§94 was vaiid when the proceedings ziniiiaéed under first notice dated E4,f2.E992 was not Csrzeluded by way Q1"
5* an assessment T?' 53/ /* gr?/3
25. Whether the reason recorded for issue of notice itrider section 248 of IftC€)T}'L¢$'j£:€I$"fl Act, dated 24.1I..?.994 are sufficient and * to assumejurtsdictioh to make Ci reassessfoentihi? h
26. Whether on the ' circumstances of the case'; the Tribiifidt». nods ' legally justified in hotdinig that Vthe_ hbiaridatozy:
conditions for issuah}:e'.:' of "iioticef dated 24' 1 2.1994 have'§?e'en'."coh*igo?.ied'Vwhen the reason recorded are metedsurmisefahcieéorestcmption and reapprectation . if existing 7:: Wriether the..a§$essment order dated :.:2773A.t9"/5-VV:§VA9,barzjedV__ by limitation under the jsrovisions t'sectioh».1.;53 of the Incometax Act on the fcieis and circurrbis tances of the case ? .. A28. Vui/Vfiether on the facts and it _ "e.if'c:,:ovsVtonces of the case, is Tribimai right in tow ' in Canceling the assessment ?"
h ,. hi is the ease of the appellant that he is an it iir1Cia:'.yidi1ei1 earrying on reai estate development and that for AV'th.'e'dAssessmer1t Year 1991-92 he filed his original return of it it "income on 122;' 12/' £992 deeiaring totai income of R53 Eakhs. Thereafter, return was {fled on 28/' 10/ E995 declaring toiai income of Rs,3;t57t93££f~ and also declaring agrieuiturai X?
if ya income of Rs.izii22,500/~. The assessment was_'4'coinf§le'ted under Section 143(3) i~/W 147 of the Act 2231/sftiesléfll' disallowing some of the expenclituie. of income V the appellant and a part of the agrivcnltiifal incoine '.anfl'--.al'soVV Various additions were made offic.ei*.--..Afggfi:e§ed the order of the Assessing Officeir;" lueppellant-Apreferred an appeal before the Tax (Appeals), Who, on 10/ some relief on merits togthge with some of the issuessraise'd,hy*hi1in. f' the said assessment initially, notice underVSeetion'=_lZl8'lwas issued on 14/12/1992 and in to thevllsaidxnotice, the appellant by his letter dated :_l'9'.9'2;:ii:formed the Assessing Officer that he had filed income on 22/ l2/ 1992. According to the apne"llant,V the Assessing Officer did not pass any order it Although' he was bound to do so on or before 31/33/1995 Affiiaer Section 153 of the Act. The Assessing Officer issued 'hone more notice under Section l48 of the Act on 24/ ll,' l994 recording the reasons for issuance of the said notice: On the question as to Whether the Assessing Gfficei' has the jnrisoiction to issue a secono notice under Section Eég of the and aise on the question as eshether the i Q jg!' I <1:
1
said netice was vaiid in the eye sf law as well as with regard ts reasons recorded for the issuance of notice undeffieetien 148 of the Act on 24/1U 1994 and en the assessment order dated 27/8/ 1997 by limitation, the Appellate Commissioneedfiddid ':not.. égi*ee€52ith the appellant. Hence, the;sppe1iant'v--preferfed before the Tribunal.
5. The Tribnnsi 12/5/2003 held that the assessment rn2;tde-- valid in law and therefore, vjjthewdjappellant that the assessrflnenti. initio. The Tribunal also held dated 24/11/1992 was Within the jurisdiction Officer under Section 148 of the ; Act. ante'-.;x}as" therefore, valid and that the reasons fgéerdéti f<3ri«_the issuance of notice for the second time was stifficient..Veiietigh to Conchide the escapenient of income in as=-ijnueh' the reasons had direct nexus to escapement ef inc0rne,_. Wherefore, holding that the reassessment was Valid, tizejéfribunal dismissed the appeai of the appeflant on this watspect 0f the matter, White showing the appeal on certain ether aspects. The said emer is in chahehge in this appeai.
By 053,6? dated 26/2/200-/iii this appeal was admitted ts censides the aferernentiened. S{i1{}S§j,Ei?i7iifi§ snestiezis ei ism:
S 6* sf" ,9 6, We have heard the teamed counsel for the appellant and iearned counsel for the respondent wvretientie. 73 it is submitted on behalf of the the instant case, notice dated 14/ .i;'2;;'»1.E}92.'_"was' isstiefd» dander' ' Section 148 of the Act, which :vas:"'se1*e_ed'fV 24/12/1992 whereas, evenfpvrior tofthe receipt':.__o"i'the said'?
notice on 22/12/1992;, the ap;:f>eiiant.._Vhad.'fiied_hi.d return of income. Therefore, years from the end of the had to be con1p1eted'b§.5.:V in the instant case, the on 27 / 3/ 199'?' , which is welt -period and is therefore invalid. He has ,_aiso the second notice dated 24/' iii"/'_199éi i-sinvxalid in law as the said notice was issued dViir'it§\g;,-.fi;eVV"pf:.nd€ncgtfof the first notice; Also that the second notice in iaw in as much as; that the conditions ine-ntion~ed_vt:nder Section L48 are mandatory in nature with regard-ffio reopening of the assessment and when an ""x.AAasse:ssrnent order was not passed by 31/3/3995. the atssessrnent is deemed to have been eoneiuded. That the second notice Cannot extend the tirnitation period with regard to the oonchision of assessment proceedings and therefore? the orders st" ail three atit.horit:ies on this £4 '< 3/»;
eornpiied With; that the reasons recorded are on the basis of the subjective satisfaction of the authority, which ,;;:i.;;§m_: be interfered with by a Court of Law and submitted that the authorities below xverei-rigiit/dirt: holding. that the assessment was in aceor:-glancejlvgnitifi la_W;----.in rnnclh as the second notice was also within the juiri'sdiiction";of Assessing Officer and that theerlder of fI*ihun'al does not call for any interferenice in 'ar_>pea--l, In snnport of his submissions, he has also 'relieduipoiovcleftain decisions. 9- __ submitted that applicable only if there is an Section 143. The first notice issuednnder Act did not reach its logical conjeitision in as Vrnuch as there was no assessment order passedjfa second notice could not have been issued. Having tlrie:s.:':i'ierne of the Act under Section i43 to 153, he su-h__rnitt'ed;_t'hat under proviso to Section 147, unless there is an assessrnent order passed which is a condition precedent, l' there cannot be any reassessment. He therefore, reiterated Vthat the appeal has to be allowed and the order of the it 5%, authorities 'sets: I have to he set aside. /9» IQ, Having heard the counsel on both sides and on perusal of the material on record, the points that wo1§,1:ei'earise for our consideration are as follewsr I ,1 Whether the authority was competent'_'toVis;e:tte' noticeu dated 24/ I I / I 994 issttectLtn;der..Sec:iort« the
2) If the answer to poirlt No.1 inr.'th;:;; whether the reasortéfeeordect' for the ztesuance of such a notice a..;'te;dts to-the materiatvon record?
3) Whether the "asasesSmeftt on 31.3.1997 is valid in the eye_:of..Zau}7? :_ V' "
11. cah tgettsaidflsthat if the answer to Point No. then the other points for consiljiera.tiori 'W<t\1_11'd, 01113?' he academic in nature. 12:' _V rnaterial on record, it is noticed that in reSfi>ectf'0f_ the "aeses;3rner1t year 1991492, which is under ' ;c'o:3;sid.eratio«ri;.._the last date for filing of the return was "3«(.)f/71O;v/ However, no such return was filed by the apéttaetlahthvét before the said date. Subsequenfly, on 2 'A:2;'4~,e_'.2/ 1992, a Search was conducted in the premiees cf the 'AA"a';t§;oe11ant under Section 132 of the Act and thereafter, a 'declaration ef ineeme of R33 lakhs was made by the appellant, However, there was 110 return which was filed. Therefore, rzotice under Section 148 at the Act; was issued an 1"?
We , 14, Under explanation to Section 14? pertain situations which are deemed to be cases of income,e's..eapir1g assessment are stated as follows:
Cl} where no return of incorntewis'fitfn.tsher;tV'Ejy_ cine' assessee, although totaZ:":ineo_:"neV taxable Eimit: V' _ t % 'V b} where a return of has lfieeftfetrntggéhed, but no CLSS€S',S.n'l€fZi: the assessee is ;,&>);ncz'._ to {_ 'hctoe; "finders tated his income or clatn_1ed__ deduction, etc, rei'jAurn;'ct/i1d«.VAA"'vt"_j_*~.__. V c} where a;ssesS--zne::,tt been made, but ineoz'%1e;";Vchcugeo;bxle«. has been under» """ beenwassessed at too low ca rate :<V)';'~:V:'V'»..¢ny4fl"e,%cessive loss or relief or « 'deprectc:tto.*:;' allofajance or any other allowance under' t'he"Act been ailowed.
15'. t The Assessing Officer may assess or reassess .su5'ch1 itieexneoether than the income involving matters which are~«..the__'"sabjeet matter of any appeal, reference or revision, which 'chargeable to tax and has escaped assessment.
16. Having regard to the facts of the present case, it oeeemes eiear that in respect of the assessment year E§91~92§ the appeliant, assessee had is file his return em or hefere 2%, §§i«}'L "fie same was as: sane. Subsequeetiv, 5;» /_ :-
"seeoncl notice", under Section 148 of the Act peneleney of an earlier or first notice under $eVetion--. the Act. The circumstances under. Whieh'Vthe--.l'_tWo"Vnotices' have been sent have to be borne '-in zfriincl. 'The"'first:"eno't:§ee dated 14/ 12/ 1992 was issueti.tinder._SeetioniV»'lV'¥€§8vl:ot , when there was no return hand the 'notice was validly issued. When" retu"rn'* ftleel {l)t1V°22v/4"12/1992, even before the service 11 the purpose of sending such, there is no bar in law to selnltlba 148 of the Act after the return.d.ate€l.ol'22;'--:lf2V/ by the appellant. Such a notieeflean' Assessing officer after perusal of the rettirni after a return is filed but no assessment halsV"loeen made and the assessee is found to .ha've t;Endei*.A_stated his income or claimed excessive loss or '"gieé1t:etio.n»v'ii1.i_the return. This notice dated 24/ 1 1/ 1994 was .';n'"faetl 1.i§:;_f:.Vi.5'ol:3jeete<:l to by the appellant, but was also reslpendeelé to by filing a revised return on 20/10/1995. 2 Affherefore the notice dated 24/12/1994 was validly issued eonsielering the return filed by the appellant on 22/12/1992. Point l\3'o,1 is aeeorelingly answered against the E ,A appellant. é}:/g
18. Counsei for the i es reiied upon the following decisions:
(at) in the case of M/s.Renuka Indlit'§_ifriCf'5:
Income Tax Ojficer [rm No.1~8'7/2005?', ;iispo_s»ed.,:oi\~t.,Dn j\ 28/ I i /2007 by this court, it has a notice under Section 148Vti?ié'~b©€fl.iS3t1€§1A served and proeeedingsare by the Officer, such proceedings shoiiida the end of two years of issuaneeof n:.::t':'::'e.:l'; said case, since the questi_{>n§"oi' _be.enieonsitiered by the Tribunal, the to the Commissioner of ljncorne hoiding that there is no provision under the:A<:t one more after notice under See;tioii..i48 of. Act has been issued. The said decision '' «sqiia.re'iy applies to the present case, the case of Commissioner of Income-tax, Faifdéigad v. M.P.Singh., reported in [(2008) 174 Taxman (Punj. 82, Han}, the Assessing Officer had issued notice the assessee under Section 142(1) of the Act, oaiiing upon him to furnish the return of income. The assessee filed return beiatediy and the same was treated as an invaiid retsnrn. Thereafter, the Assessing Gffieer issued 2: notice ,» av" ' under Section 148 ef the Act and coinpieted the asses'sifnent under Section 143(3) / iii?" ef the Act. it was §ii*ei<;i;.i;hat__vthe Assessing Officer was right in issuing I'1OJ[ii{_)'f:"'.!;i.flC3':£.'V§:i' Sectii;nu 148 without framing assessment resipsnse to' eariiefnetifre issued under Section 142(1) of the7Act--.._ The :s'ai:€i"d'ecisi.d'n Vi.S'.' not applicable to the facts present in the instant case, two notices hedfe'tiséeti-»t.i.ssuetiVVnnEier Section 148 of the Act, whereasgini the earlier notice was ef the Act and the st1bseque1jitVnn_tiee- tinti:ere.Section 148 of the Act.
:20. T'in'V_.the¥easev:ietcommissioner of Income-Tax v. Jaideoufain 'resorted in 227 ITR 302 (RAJJ, it has been held fresh assessrnent proceedings initiated for the ' same iasse--ssmentV"'j;*'ears were invalid because they were = the basis of the fresh notice issued under the Act and the notices were issued on March 31, 1986', and March i7, 1981, i.e., at the time when the eisigiiiai proceedings initiated under Section 148 were stiii ' sending and the original assessments were barred by time and therefore? the tribunai was justified in annuiiing the assessments made untier Section i47,/E48. Having explained the eirenrnstances under which the notices have ,2:
,,»--m>' been issued in the present case the aforesaid decision is not applicable.
21. In case of Commissioner of In.eomg;'Trix_'_"iv.V' P.Krishnakutty Menon [131 1:rR'2371,--'_' it held that when notices were issued .91;/4'7"
31/3/ 1975 and served 'the i.fi}.1_'€€ V1egai.rh'eirs on 11/4/1975 under S_ection:.-«l '3.Zf3j'{2')utbr)_(ii) 9 oft-.th.e§ Act, the assessments based to be completed on or beforé _'"3'lV9"'/" 225.0: done. The assessrner3,ts'--.:. final orders were made on 24/3/1979, Whi0f3__\Vas further notice was sent to all the Legal. Section 147(a) of the Act, on 214/:12/_1978,"» it which date, reassessment proceedings iinder Section 14-?' (b) were pending. it was held 'that second notice was incompetent and unautho}'is.ed, as successive reassessment proceedings could not beiiiitiated when reassessment proceedings were already pefitiingi It was also held that there was no failure on the .9 ___§>art of the assessee in the said case to disclose truly and rail 3.11 prirnary iac-ts and that if the irrcorrietax Officer failed to inform himself about the true position in iaw, that cotrid riot he rnarie a gfrorrrid éor reopezoirig the agscssroerrt ' / xx' l }_s \C) l under Section 14'?(3.:}. Since the assessee made a foil and true disclosure of all primary and material faci.s_i'-.it~.was, therefore, held that the initiation of proceedings under Section l47(a) was not_vali--d:~Tl'he fa_ct§i'n» . this decision are distinct from the faet.s}in--,the' present 'ease and therefore the same is not applicable to th»e'lpgresentVl§case, it ;
22. In Commercial Ca.m,m.ihsioner of Income-Tax, Lucknow, been held that an Income to issue notices under repeatedly. When following the issue of a notice same are validly pending, no fresh iinder the section' Subsequent noti;Cest.can be in pursuance of the provisions of Yécpiiring the assessee to Come forward and explain the ret~=irnViill:ed--v'by him. However, as there is no specific bar oln-..theV__assessee filing a revised return at any time before the Aassessrnent is completed, a voluntary return is not oh_lit.erated merely because the notice, in pursuance of which _ was filed, was illegal.
232 In the said case. it was also heid that though a second notice eannot be issued when the proceedings isiw' .
V, t I {\ D C} I consequent to the first notice were pending, nevertheiess a return filed pursuant to a second notice not automatically become iliegai or iI1fI'uCtuOu§'~,«~~--.:§iIi§i"'V,:' the assessing authority has the jurisdiction to hco'inp1'e:_te K»I'i«V§"
basis, the proceedings for reassessment' 'within the date of the first notice and that thei11.ega1ity',.'of:'the notice would not Vitiate the assessment oiidei:
24. In 247 of Income-Tax v. Rajendra ':.Court held that when a. notice is issued under assessee was assessed, aecofsdingiiri theessessment when the return was bad in law. Keeping in mind th§;.<gC'tS ofuthe present case, the aforesaid two decisions are V " not apjoiicebie.
Viziviease of A.S.S.P. And Co., v. Commissioner ofirgcéméfifirax, [1 72 ITR 2741, it has been heid that when a .. it .z'et._1n'n is fiied by the assessee in response to a notice under u':E'seetion 148 of the Act it is not open to the Incometax H Officer to ignore that return and issue a fresh notice under Sectien 148. After the reassessment order is made in pursuance of the first notice is issued under Section 148, if zi /it/* not a Condition precedent to eenferrnent sf _ the ineorne--tax Officer; it is a Condition precede-nt~,en*i;§§ to the -« .. making of the Order of assessrnent;
27. Cnunsel for the h_as.VVre.fer'r_:ed' the". following decisions insupp0rt~-utihislthe-arse \tfithv..regard to the implication of ledging ..t:h'e_pease of Esthuri Aswathiah V/sjg rncogniéi' 141 HR 539 (SC). it 22(8), an assessee may st thrnished the return under Sub~s'eeti--0nl.Vh{'2)':':- any omission or wrong statementlthereiri.."'.AV_But':sueh a revised return can only be filed 'at. any before the assessment is made and not pd 'thereai"ter_.' "In the said ease, the return was submitted after ._the .as'sessnren€ was made pursuant to the earlier return and thus it eeuld not be entertained. It was also held that the . lesdgingsof such a return did net debar the Assessing Officer Vfrern commencing a proceeding for reassessment of the appeltant under Section 34(1) of the Act. In the said case, it was also held that where there is a failure on the part of the assessee to make a full and true diseiesure and the Assessing Officer has ts believe fer a reasen ef the failure en the part ef the assessee aii material facts necessary fer assessment fer that year: tneerner profits or gains ehargeable 3"
/§'$ I ('O D) T to tax to have escaped assessment and the Assessingfifiieer has, therefore, jurisdiction to issue notice for re.1%?tsses.s'i'n_eiit:;' .
In conclusion, it was held in the Vsgiid cieei'sio--r1:fthétt if an"
assessee filed a return after her retiirnihaei heenA.'dispostedV.;of,« then the said second return_i's_of noH_eonseq1_ienee' éifteii the assessment being made and :t5"'ta::§{'n:io~: be ~t_re'ated ievised return.
28. In the case i of' Income Tax V/s. Bidhu Bftusnjz s;§Ark§¢£.~:(1-9é~§j6;3_'__iné 278 {so}, it has been held ii;-fi_X.VC)ffiC€T passed an order with reiiiarlfis ifiiply} that there is termination of proeeed'i,ngs wtzay in which such an order can be Vacateéjejgby jurisdiction to intervene. _ 2'9; the ease of Commissioner of Income Tax as[§...,iM;i>;Lbav'i;§"f1 986)1 62 ITR 251 {Kar}, it has been held theit t1--ie.'*Afords "no proceeding" used by the ITOS in ass_essnient proceedings to signify that there is nil ' 'A-sissessment or to eiose or drop them, it wouioi not mean that ..._ti1ere was no termination or eompietion of assessment X "N .
proeeeéiings. 'X'
-34..
30. In the ease of s.K.V.eez§ataj:: . V25; Commissioner of Income Tax (1 has been held that where a return is filed limitation period prescribed feridpassing order under Section 153, suelze. retttfri évalidtethdx the ITO has lodged the return 2ts.:eppeal is preferred against the final and the assessee" --.f0fward loss.
31. 1 _VIn.;:.tl_1e ease_. Cftavntmlissioner of Income Tax V/s. :5§sitbr{i::;ari5ii§u:§:'=:goo7jéé1 ITR 63 (Mad), While eonsiderihg Steetloehls. 155 of the Act it has been held that c0mpleteV 2 assessment as envisaged under '~ lV55V{l]wefild....mean .9. pesitive act of completion which ' elearly distinguished from lapse of authority to aésess of the period of limitation. In the said ease, the eriginal assessment was sought to be rectified u x V' 7:1}7iC-{$31. Section 155 after the firm had filed its return belatedly "'ahd"A'the same was lodged. It was held that it was not ' V V' jjermissihle.
32. As far as the second peint is concerned, if the Assessihg Officer has reason tea believe that any lneeme chargeable ta tax has escaped assessment for any 5%;
M) (fl assessment year, he may assess or re~assess si.2ch_'in'cojrn§e, Once an assessment is reopened, any other_i"n.co1ne which i has escaped assessment and the Assessing Officer subseqtrentfi?'-._Aint proceedings under Section also thell assessment. Howeveifthere 1.a:¥é_ lc'cn&ditions'W'hich are to be satisfied. Firstly, have reason to believe «gains chargéable to incorne«ta:i¥: " Secondly, the Assessing' liaveirfaason to believe that such escape'r_nen_t reason of either omission or failure on the part-v__of:.alssessee to disclose fully or truly all mvatleriail facts ne'ces.sary for his assessment of that year. s::+;..?rr;e joroeeeding can be commenced if the Assessing Of-ficer.i;as}=material for the belief that income has escaped Aassessrrient. Circumstances must exist for arriving at an 'opinion. Reasons to belief must be based on the material and not on irrelevant considerations. If the Assessing Officer has reason to belief that the income has escaped assessment, then he can cause notice to assessee under Section la'l8. in other 'JJ{)l'{'lS, there must be a nexus between material and the belief and a change of oginion by the Assessing Qffieer Wetilé fééfil. center _itrrisclict,ion for re sf, r {< K aw \ \ \
34. The point to be considered is as~*to_A' notice dated :24. i l.l99rii issued under SectionlV_"}.4i8 A-.:z:
is valid. in this regard the decisions lcitetiiat considered.
Counsel for the appellantll'i3as~referred. following decisions:
a, lofficer, I Ward, Distt.I/I.Q¢:lc'tg.tetg:- Llakhmani Mewal Das, (1 97611o3j:"A'Ifrfi'*¢;137;:'.'taé lApex."lCourt has held that the reasons for got the belief contemplated by section 1472' (aloof l theAct,._ll.for the reopening of an assessment rnust have rational___&c.onnection or relevant bearing on the » iorniation "t.h_e belief. Rational connection postulates that H ~there a direct nexus or live link between the niaterialcorning to the notice of the lncornevtax Officer and "thetorrhation of his belief that there has been escapernent of l7.the"inconie of the assessee from assessment in the particular l V' "year because of his failure to disclose fully and truly ail material facts. It is no doubt true that the court cannot go inte the sufficiency or adequacy oi" the material and substitute its own opinion fer that of the incorneetax Officer es the gcsint as tc Whether aetieen sheiiié he initiates ier 35 X, g» f. In the ease of Gauge Saran 82. So;2~:;-- V/s. Incometax Ojjficer & Others (1 981 V' has been held that twe distinct eo:.it1tti'e';:1s3_ _se;tiefied befere the I.T.O1 can assume jufisdietion t0_VV.iesu.e" under Section 147(3). F'irst,191*1,<:f:49" musthhtxaye :eaee1<fft0'V'be1ieVe" 9 that the income of the assesseVe__has_ eVseaped"assesvsh1ent and consequently, he _h:s_tVe{_' to beheve such eseapement is by reaser;.,of.theA :)rr:iésie11§._"Q.r failure on the part of the «dieeV1os.e tru1y all material facts neees's'a3:"y..fi3rv'3;$se'SSInentb _ V 1 facts of the case, the appellant-
assesseeVVfi1eti.VRetut*1:_Of:1'11come on 22.12.1992 declaring a totatei. tncnme V'e"1'"wRe_._;3,O0 lakh Without the profit and loss .ae.e_0uhtV..artd.V balance sheet. The same was filed on .€3S.1;iII1Et'ii.:C}T1v1}Te3:Si.i§. The assessee requested to treat the said return _e§'tespense to the netiee dated 14.12.1992 which was iestted on aeeeunt of the fact that there was no return ftiieldfi til} then. Subsequent to issuance of netiee under Section 148 dated 24.11.1994, the assesses: fiied revised 9 hvttfetum on 20.19.1995 declaring income of Rs.4,57',934/~ erteleeing prefit and Ieee account and balance sheet. Prior te ,.«»'fl~ the issuance of notice dated 24.11.1994; the Assessing Officer has recorded reasons as follows:
223.: 1.2994 -~ The _as.s,essee"';ft'zaaL;V. his;
Return of Income declaringeani-irteonzehi at lakhs. However, sincejihe Ret:Lrrt--._of Income dd defective as per the proz.;L:i§stons oj.Seett'o'r; and the defectioe Loer_e_:VVV'not'feetfliedhbyvvfi the assessee. The rettirrt H N This however, meons "fiféeonjge of Rs.3 lakhs hasVescapeddossiessnient. 3 In addition, the excess incomej.b'etng"shoLon by the ligrodught to tax as income from. 'fi.;soL£rces hands has also 9' ' Ass_e4s.srrzer;tV '--hen:ce3_':"'rLotice u/s. 148 is to be vi"
_ issued 38, _4A"1Therefore, the reasons recorded prior to notice on 24.11.1994 are on the basis of the retnrn on 2212,1992. The said reasons recorded on 23.1 1g1'9.94 in our View are sufficient to establish nexus with » tnearnaterial on record which have rational connection to the Vrnaterial Coming to the notice of the Assessing Qffieer and d V' the formation of his opinion that there has been eseapernent of income of the assessee from assessrnent in the particular year. It is not a ease where there are no reasons stated at at} v},w'""
Xe' gm l LA)
ix) ! or that there was no rnateriai to entertain a betief has been escapernent sf income from aSS€SSi'I1t':I1t:.'~. 11'ierefcr_e," = the assumption of jurisdiction theAAAé3sessing*- recording the said reasons and issiianee of egthefseaid notice dated 24.11.1994 in our Vievtnislb in accorclancevvgwith law. Accordingly Point 1\1o.3iisV.ans_\}\rereC1.:<._ 1
37. In order to "answer having regard to the position of andA"ta1§3'n:g the facts of the case it. elejarithlatto the search made under Secti'on{:' residentia1 and business premises 24.;éV.1992., the Assessing Officer issuedvvllinatiee ..-148 of the Act on 14.12.1992 as no return of ineorne lhadvheen filed till then by the appellant. Erettirn hadv--.----no't been filed till then the appellant-- ' --._a return only on 22.12.1992 the Assessing Officer.' 'lvfhereafter, the Assessing Officer by recording reasonlslonl 24.11.1994 issued notice under Section 148 of 'rtheé Act on the ground that the income had escaped '"._a's's'e:ssrnent. In response tn the said notice? the assessee
-"fi1ec1 revised return declaring revised total income of Rs.41,57,934-f-- on 2G.1G119951 On the basis of the reviseéi return, the Assessing Officer conciueled the assessment oreier on 2?l3l1§§? xeh1en is within the ;nerie::i of info years ' ;r «*i%::;:'' i 4/J Q It} 1 train the end of the assessment year having regard Vt"c=.._ the fast that the assessee had filed the revised 2{}tlO.l995. Therefsre, the assessment V' 27.3.1997 is made within the prescribed.period.u§fl:.}i:nitation.« and accordingly, point No.3 is answered in"fav*o,nr revenue and against the appellan"t~..yb
38. in View of givlénidta, the points raised by us, we hold' ,_that"the 'right in law in concluding a'sse_s'snzient in law when the Assessmg to issue notice dated
24. l 994 of the Act. We hold that the said notirre vxfas" the issuance of the earlier notiee dated We also hold that the issuance of .A 'noltieefi'ander_VSection 148 dated 24.11.1994 was based on H ._sti:r:ciadt..,_ relevant reasons and therefore, the assnrrqotien of jurisdiction by the assessing officer was in d it aecordanee with law. Therefore, the tribunal was justified in lhoiding that the mandatory eonditisns for issuance of nntice dated 2431,1994 had been eoniplied with when the reassns were recorded. We also hold that the assessment order dated 27.3.1997 is net barred by iirnitatien under the provisinns of Seetinn i53 of the A-€:9 Aeeerdingiyi we answer Ki /* /9?'/:':% the substaniiaé quesiiens GE iaw againsgt {he appellant» assesgee and in favour of the revenue.
39. In the result, the appeal is dismiss¢--::';..,W y'.
A", 3*"
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