TaxTMI 
TaxTMI 
2016 (7) TMI 706
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....ceedings. 2. Facts in brief go to show, that for the assessment year 2009-10, the petitioner submitted his return of income on July 24, 2009, for which he was issued acknowledgment No. 03231008092. Records further indicates that at the relevant time the petitioner was working as the Commissioner, Department of Urban Administration, Government of Madhya Pradesh, Bhopal. It is the case of the petitioner that he worked as Commissioner in the Department of Urban Development and Administration between January 13, 2006 to December 11, 2007, thereafter was posted on deputation with the Government of India, he was relieved from the post of Commissioner, Urban Administration on December 11, 2007, vide certificate annexure P-8. Thereafter, he remained on deputation and returned back to his parent Department in the State of M. P. only in 2014, where he is presently holding the post of Principal Secretary, Transport Department. However, it is the case of the petitioner that he received the impugned notice annexure P-1 on March 27, 2014 issued under section 148 of the Income-tax Act, wherein respondent No. 1 indicated to the petitioner that he has "reasons to believe" that the petitioner's....
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....tion, Government of Madhya Pradesh and in the award of contracts to two companies namely M/s. Nagarjuna Construction Co. Ltd. and M/s. Simplex Infrastructure Ltd., certain loose papers seized in the search operation bearing pages Nos. 55 and 56 and pages No.122 of LPS 21 and LPS 26 respectively, indicates that illegal gratification was paid by M/s. Nagarjuna Construction Co. Ltd. to the petitioner. It was said that one Shri A. G. K. Raju, a director with the contractor M/s. Nagarjuna Construction had admitted about payment of illegal gratification. It was indicated in the reason supplied that in LPS No.1 page 155 in the back side depicts the figure of "267" which corresponds to the value of the contract awarded to M/s. Nagarjuna Construction Co. Ltd. wherein the following notings were made : 267 M 6% 16.02 267 P 1.25% 3.33 267 C ½% 1.335 267 M 1% 2.67 267 - ½% 1.335 4. It was said that listing as indicated hereinabove depicts the vertical chain of Government hierarchy involved in the allotment of Indore Sewage Project and in this, the figure "M" denotes for Minister of Urban Development, "P" the Principal Secretary, Urban Development Department, "....
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....arded by the Department of Urban Administration and Development. The contract was for a work given by the Indore Municipal Corporation, as per the Government notification issued in the matter of delegation of power under the provisions of section 37 read with section 73 and section 433 of the Madhya Pradesh Municipal Corporation Act, 1956, the Mayor-in-Council has been delegated with the full financial power for projects pertaining to Jawahar Lal Nehru National Urban Renewal Mission and as the contract in question is awarded by the Municipal Corporation of Indore after due approval of the Mayor-in-Council, it was said that the petitioner had no role to play in award of the contract. The petitioner with facts and figure submitted a detailed objection and when the objection was not decided and notices issued for proceeding with the matter, this writ petition was filed. However, while the writ petition was pending, vide annexure P-13 dated March 19, 2015 objections of the petitioner were rejected and it had been held that the petitioner was a key person engaged in controlling the decision making process for award of contract to both these companies and as he was the intermediary betwe....
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....unicipal Corporation Act, tried to point out that even the decision to award the contract is taken by a different authority wherein the petitioner was not at all involved. He further invited our attention to the documents received by him under the Right to Information Act, the documents filed by the Revenue to point out that except for certain loose papers filed by the petitioner and by the respondents as annexure R-1, R-2, R-3 and R- 4 showing the figure 267, the alphabet "C" and "½" per cent. written in the loose papers, there is nothing to indicate that the petitioner was in any way connected with any award of the contract or the work to the contractors in question. Shri Shrivastava also invited our attention to annexure P-15 dated February 12, 2015, the communication made by the Deputy Commissioner of Income-tax to the Principal Secretary, Department of Urban Administration, whereby the Income-tax Department sought for certified copy of the relevant file, figures, order sheet, minutes of the meeting with regard to award of the contract to both the companies M/s. Nagarjuna Construction Co. Ltd. and M/s. Simplex Infrastructure Ltd., reply of the Government to the same file....
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.... Deb Singh Bist [1973] 88 ITR 200 (SC) ; [1973] 3 SCC 581, Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) ; [1977] 1 SCC 408, Piyush Infrastructure India v. CIT (Asst.) [2012] SCC Online ITAT 13463, GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) ; [2003] 1 SCC 72, Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri [1954] 26 ITR 1 (SC) ; [1955] 1 SCR 448, Central Bureau of Investigation v. V. C. Shukla [1998] 3 SCC 410, CIT v. Girish Chaudhary [2008] 296 ITR 619 (Delhi), Addl. CIT v. Lata Mangeshkar (Miss) [1974] 97 ITR 696 (Bom), ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), Madhya Pradesh Industries Ltd. v. ITO [1965] 57 ITR 637 (SC), Madhya Pradesh Industries Ltd. v. ITO [1970] 77 ITR 268 (SC), Sheo Nath Singh v. AAC of I. T. [1971] 82 ITR 147 (SC), Arjun Singh v. Assistant DIT (Investigation) [2000] 246 ITR 363 (MP), Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), G. Sukesh v. Deputy CIT [2001] 252 ITR 230 (Ker). 7. Primarily, to say that "the reason to believe" which is a prime requirement for initiating the proceeding under section 147 read with section 148 being not available in the present case, the entire proceedings are liable t....
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....d after the adjudicatory proceedings by the Assessing Officer is completed and therefore, interference by this court is not permissible. He heavily relies upon a judgment of the Supreme Court in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC) ; [2007] 210 CTR (SC) 30 and argued that in this case the assessment has not been completed, the return filed by the assessee was only processed under section 143(1) and in the absence of there being conclusion to the assessment proceedings, the question of change of opinion does not arise. It is argued, based on the said judgment that as no assessment order has been passed or as the assessment is not completed, the case in hand is covered by the main provisions of section 147 and not the proviso to section 147 and as the condition necessary for bringing the case under the main proviso of section 147 is in existence and Assessing Officer has formed the opinion based on the material which are available, interference into the matter at this stage is not called for. He relied upon following judgments in support of his contentions to say that at this stage interference into the matter is not called for CIT v. ....
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....e of hearing. The first judgment relied upon was in the case of Calcutta Discount Co. Ltd. (supra) decided by the Constitution Bench in the year 1961. In this case the provision as it then existed under section 34 of the Income-tax Act was considered and it was found that normally the well settled principle is that the High Court will have power to issue in a fit case an order prohibiting any executive authority from acting without jurisdiction. The availability of alternate remedy in the Income-tax act was considered in this case and it was emphasised that the condition precedent for assumption of jurisdiction under section 34, if not satisfied, then there is no reason to refuse a proper relief in a petition under article 226 of the Constitution. Section 34 was considered in detail and the import and meaning of the words "reason to believe" was taken note of and the principle laid is that the opinion formed by the Income-tax Officer should be based on cogent and substantial material which makes the Income-tax authority feel that the requirement of the condition precedent is made out. This case was thereafter, again considered in the case of Rai Singh Dev (supra), wherein the hon&#....
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.... in the material and the assessee. Finally a single Bench of this court had also considered this question in the case of Arjun Singh (supra), after detailed analysis of various judgments, both the questions with regard to exercise of the jurisdiction in a petition under article 226 of the Constitution, the material available for change of opinion as is permissible under law and the difference between "recording of reason", "reason to believe" and "reason for suspicion" have been considered and the law laid down is that an order passed adverse to the interest of the assessee should not be based on irrational or irrelevant consideration, it should be based on objective and relevant material and merely on the ipse dixit of the officer on vague, farfetched fanciful, remote information or allegation is not sufficient. It is held that there should be clear nexus between the material and the reason to believe. Accordingly, on a complete reading of the case law in extensio cited by Shri Kishore Shrivastava before us, we find that most of the cases deal with two aspects, first, the jurisdiction available to this court in such matters under article 226 of the Constitution and the principles ....
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....1998 and in para 13 detailed analysis has been made in the following manner (page 508 of 291 ITR) : "One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from April 1, 1989 and March 31, 1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the asses see notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the asses see concerned....
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....the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D. K. Jain J) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is pay able by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any 'assessment' is done by them? The reply is an emphatic 'no'. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making mach....
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....by the Supreme Court, we find that the expression "reason to believe" cannot be read to say that the Assessing Officer should have finally ascertained the effect by legal evidence or conclusion. At the stage when the matter is pending, the final outcome of the proceeding is not relevant. At the stage when only notice has been issued, the only consideration would be as to whether there was reasonable material available based on which a prudent man's approach can be adopted to form a requisite belief. Whether the material would conclusively prove the escapement or not is not of concern at this stage. If this be the principle of law as laid down by the Supreme Court with reference to the matter, we have no hesitation in holding that objection raised by the Revenue in the matter of interference at this stage has much force. In fact, in the judgment rendered in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), the words "intimation" and "assessment" used under section 143 in different places is considered to be with reference to different context and in the judgment the final conclusion is that if the assessment has not been completed, accuracy and sufficiency of the materi....
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....t may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. . . .' One of the purpose of section 147 appears to us to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can....
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....after they had been concluded, unlike in this case wherein in view of law laid down in the case of Rajesh Jhaveri Stock Brokers (supra), we have to hold that assessment process is still in progress and therefore, question of change of opinion or reopening of assessment already concluded will not arise. That being the difference between those cases and the present case, we are not inclined to accept the submissions made by Shri Kishore Shrivastava, learned senior counsel. 15. During the course of hearing it was indicated by Shri Kishore Shrivastava, learned senior counsel that the entire process of awarding the contract and its finalisation was undertaken after the petitioner had left on deputation to the Government of India. This aspect of the matter has been considered by the Revenue in the detailed reason given for proceeding further in the matter and they have indicated in the said reasons that when the petitioner was holding the post of Commissioner Urban Administer and Development in M.P., various process in pursuance to the tender earlier issued and subsequently issued on modification took place and shortlisting of the two contractors, namely, M/s. Nagarjun Construction Comp....
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....der the Income-tax Act. It was held by the hon'ble Supreme Court in the said case that in the stage of assessment of the proceeding the High Court ought not to have entertained the writ petition, instead should have directed the assessee to appear before the Assessing Officer, permit him to take a decision and after framing of assessment order, the assessee should seek indulgence into the matter. In para 16 and 17 of the said judgment, the hon'ble Supreme Court has dealt with the matter in the following manner (page 718 of 357 ITR) : "In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not have entertained the writ petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the assessing authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act. In view of the above, without expressing any opinion on the correctness or otherwise of....