TaxTMI 
TaxTMI 
2009 (8) TMI 1021
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the relevant year, which disclosed the alleged loan of Rs. 25,49,300 allegedly advanced by Mimec (Sikkim) Investment Pvt. Ltd. to the petitioner company. The petitioners have claimed that the said loan was also disclosed in the balance-sheet of Mimec (Sikkim) Investment Pvt. Ltd. for the year in question. On March 20, 1986, the Assessing Officer completed the assessment for the assessment year 1983-84 under section 143(3) of the Income-tax Act, 1961, and computed the total income of the petitioner company at Rs.71,040 for that assessment year, as against the loss return of Rs. 63,270 after disallowing certain deductions claimed. The loan referred to above was accepted The petitioners appealed against the disallowance of expenses and other deductions and pursuant to the appellate orders the income was later recomputed at Rs. 17,340. According to the petitioners, the assessment was done upon examination of all books of account and documents furnished by the petitioner company in response to notices under section 143(2) and 142(1) of the Income-tax Act, 1961. The loan remained outstanding even in the financial year 1988-89. The loan was not questioned till the assessment was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner company. The Assessing Officer also noted that the balance-sheet and the profit and loss account of Mimec (Sikkim) Investment Pvt. Ltd. reflected, advance of over Rs. 29 lakhs to the petitioner company within a few days of incorporation in Sikkim, but the source of the amount had not been properly explained. The Assessing Officer concluded that creation of a subsidiary company in Sikkim in the financial year 1982-83, when the Income-tax Act, 1961, did not apply to Sikkim, and the procurement of loan of Rs. 29 lakhs from the said subsidiary company founded by unknown sources, within a few days of its incorporation, was nothing but an arrangement to bring in funds to the company from undisclosed sources, taking advantage of the fact that the Income-tax Act did not apply to Sikkim. The Assessing Officer concluded that the petitioner company had, by recourse to the aforesaid arrangement, concealed the income from undisclosed sources, amounting to more than Rs. 29 lakhs, which escaped assessment during the assessment year 1983-84, due to failure on the part of the assessee to disclose fully and truly all material facts necessary for determination of the correct taxable in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plain the source from which the loan given by Mimec (Sikkim) Investment Pvt. Ltd. to the petitioner company was funded. It is not the case of the Revenue that the petitioner company did not explain the source from which the loan was funded, even though it was called upon to do so. It is also not the case of the Revenue that any information furnished by the petitioner with regard to the source of funds for the loan was false. The Revenue further submitted that the notice under section 148 of the Act was issued for the assessment year 1983-84 on May 11, 1992, after obtaining the approval of the Commissioner of Income-tax and after proper recording of reasons. The notice or the order of reassessment made pursuant there to do not warrant interference of this court under article 226 of the Constitution of India. The short question involved in this writ petition is, whether the notice under section 148 of the Income-tax Act, purporting to open assessment of taxable income of the petitioner company under section 147 of the said Act, could have been issued after expiry of over six years from the end of the relevant assessment year and whether the loan taken by the petitioner company ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) Where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 148. Issue of notice where income has escaped assessment.(1)Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he loan of about Rs. 29 lakhs odd from Mimec (Sikkim) Investment Pvt. Ltd. had been disclosed in the income-tax return. It is not the case of the Revenue, that the Revenue was not aware of the said loan when income for the relevant assessment year was assessed. The loan from Mimec (Sikkim) Investment Pvt. Ltd. having been disclosed in the return, it was for the Assessing Officer to make necessary investigations with regard to the source of funds of Mimec (Sikkim) Investment Pvt. Ltd., if it deemed it necessary to do so. Having accepted the loan and passed orders of assessment, it is not permissible for the same Assessing Officer and/or his successor in office to reopen the assessment, after expiry of four years from the relevant assessment year. The extended period of limitation cannot be invoked on the ground of any omission or mistake on the part of the assessing authority, which is not attributable to failure of the assessee, to disclose material facts necessary for assessment truly and fully. In Calcutta Discount Co. Ltd. v. ITO reported in [1961] 41 ITR 191 (SC) ; AIR 1961 SC 372 a Constitution Bench of the Supreme Court held (page 201) : "Does the duty, however, exte....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITO reported in [1977] 106 ITR 1 (SC), the Supreme Court held that failure on the part of the Assessing Officer to allow correct depreciation to the assessee was not a valid ground for initiation of reassessment proceedings. The Supreme Court held that when, on the basis of the facts on record the Income-tax Officer determines the amount of depreciation allowable to the assessee erroneously, the responsibility for that mistake cannot be ascribed to be an omission or failure on the part of the assessee. The Supreme Court quashed the initiation of reassessment after expiry of four years from the end of the relevant assessment year. In CIT v. Cholamandalam Investment and Finance Co. Ltd. reported in [2009] 309 ITR 110 (Mad), the Madras High Court held that after expiry of four years from the relevant assessment year, where the assessee had disclosed fully and truly all primary facts in relation to his claim for depreciation, the initiation of reassessment proceedings on the ground that the claim for depreciation had not been explained would be without jurisdiction, illegal, invalid and void ab initio. It is a well-established proposition settled by judicial decisions that chang....
X X X X Extracts X X X X
X X X X Extracts X X X X
....would be entitled to examine whether the findings on jurisdictional facts were correct or not. In Raza Textiles Ltd. v. ITO reported in [1973] 87 ITR 539 (SC) ; AIR 1973 SC 1362, the Supreme Court held that no authority, much less a quasi-judicial authority, could confer jurisdiction on itself by deciding any jurisdictional fact wrongly. The question of whether the jurisdictional fact had rightly been decided or not was a question open to examination by the High Court in an application under article 226 of the Constitution of India. In Raza Textiles Ltd. [1973] 87 ITR 539 (SC), the Supreme Court held that, if in an application under article 226 of the Constitution of India, the Income-tax Officer had assumed jurisdiction by deciding a jurisdictional fact erroneously, the assessee would be entitled to a writ of certiorari as prayed for, since it was incomprehensible to think that a quasi-judicial authority could erroneously decide a jurisdictional fact and impose a levy. In Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) the Constitution Bench of the Supreme Court held (page 207) : "The scheme of the law clearly is that where the Income-tax Officer has reason to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n postulates that there must be a live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that, there had been escapement of the income of the assessee from assessment, in the particular year, because of his failure to disclose fully and truly all material facts. In Union Carbide (India) Ltd. v. ITO reported in [1973] 87 ITR 529 (Cal), this court reiterated the conditions and limitations for issuance of notice under section 148 of the Income-tax Act, 1961. This court held that in order to be entitled to issue a notice under section 147(a) of the Income-tax Act, 1961. The Income-tax Officer issuing the notice must hold the belief that due to omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment or to make the return, the income had escaped assessment. There would have to be materials or reasons for formation of the aforesaid belief and existence of the belief and existence of the materials for forming the belief could both be challenged in proper proceedings and in case of a challenge it was for the Income-tax authorities to satisfy the court that the Income-tax....