TaxTMI 
TaxTMI 
2004 (11) TMI 19
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....s on small scale basis under the name and style of Anu Electronics and is being assessed to tax by the Income-tax Officer, Ward 3(4), Kanpur-respondent No. 1 since the assessment year 1981-82. The grandfather of the petitioner, the late Darbari Lal was the karta of the Hindu undivided family which owned certain movable and immovable properties in Jasrana town, district Mainpuri (now in the district of Firozabad). After the death of Sri Darbari Lal, Suresh Chandra Jain, the father of the present petitioner, became the karta of the Hindu undivided family. Suresh Chandra Jain, the karta, has filed Writ Petition No. 852 of 1985. It is alleged by the petitioners that on June 6, 1995, the Income-tax Department conducted a search at the residential and business premises of one Sri Prem Chandra Jain, Mohalla Baniyat, Jasrana, district Mainpuri (now District Ferozabad). During the course of search the officers of the Income-tax Department forcibly entered the residential premises of Suresh Chandra Jain without there being any warrant under section 132(1) of the Act. It may be mentioned here that the house of Suresh Chandra Jain is adjacent to the house of Prem Chandra Jain. The search party....
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....ion 148 of the Act for the assessment year 1986-87 to both the petitioners. In compliance with the notice the petitioners filed their return under protest and had requested that the reason for issuing notice under section 148 of the Act be communicated to them in writing. The Income-tax Officer Ward 3(4), Kanpur, respondent No. 1 had communicated the common reasons which are as follows: "However, keeping in view the contents made in the alleged 'will' dated June 2, 1985, wherein Smt. Shyama Devi had bequeathed the above assets to his grandson Sri Sunil Kumar Jain, has not been considered as genuine in the assessment order in the case of Sri Prem Chand Jain (HUF). In the interest of the Revenue the explained cash and jewellery, as mentioned above are to be assessed in the hands of Sri Sunil Kumar Jain in his individual capacity on protective basis as precautionary measure in the assessment year 1986-87. In view of the above facts it is found that the source of acquisition of cash and jewellery amounting to Rs. 2,19,000 and Rs. 10,506 respectively have not been satisfactorily explained either by Shri Suresh Chandra Jain (HUF) or Sri Sunil Kumar Jain, therefore, I have reasons t....
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....aranchal); (18) AMS Jewellers v. CIT [2004] 187 CTR 557 (Delhi); and (19) Dr. Mrs. Anita Sahai v. Director of Income-tax (Investigation) [2004] 266 ITR 597 (All). Learned standing counsel, however, submitted that even though the Department has taken a stand that the amount of Rs. 2,19,000 and the pawned articles worth Rs. 10,506 belong to Prem Chandra Jain but as the petitioners have claimed that the said amount belongs to them, respondent No. 1 was well within his jurisdiction to form a belief that the income has escaped assessment and initiated proceedings under section 147 of the Act as it is always open to the Income-tax Officer to assess the income in the right hands notwithstanding the fact that the same amount has been assessed in the hands of another person. He further submitted that the petitioners have already filed objection in response to the notice under section 148 of the Act and had also been supplied reason for reopening the assessment and, therefore, they should contest the matter before the authorities and the writ petition is not maintainable. In support of his aforesaid pleas he has relied upon the following decisions: (1) Lalji Haridas v. ITO [1961]....
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....ent, the action of the Assessing Officer in starting proceedings under section 147 is open to challenge in a court of law as held in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC); Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638 (SC); Madhya Pradesh Industries Ltd. v. ITO [1970] 77 ITR 268 (SC); Sowdagar Ahmed Khan v. ITO [1968] 70 ITR 79 (SC); ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC); ITO v. Nawab Mir Barkat Ali Khan Bahadur [1974] 97 ITR 239 (SC); CST v. Bhagwan Industries P. Ltd. [1973] 31 STC 293 (SC) and State of Punjab v. Balbir Singh [1994] 3 SCC 299. The formation of the required opinion and belief by the Assessing Officer is a condition precedent. Without such formation, he will not have jurisdiction to initiate proceedings under section 147. The fulfilment of this condition is not a mere formality but it is mandatory. The failure to fulfil that condition would vitiate the entire proceedings as held by the apex court in the cases of Johri Lal (HUF) v. CIT [1973] 88 ITR 439 and Sheo Nath Singh v. AAC of I.T. [1971] 82 ITR 147 (SC). The reasons for the formation of the belief must have rational connection with or relevant bearing on the for....
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....ssing a speaking order before proceeding with the assessments for those years." The Constitution Benches of the hon'ble Supreme Court, in K.S. Rashid and Son v. Income-tax Investigation Commission [1954] 25 ITR 167 (SC); AIR 1954 SC 207; Sangram Singh v. Election Tribunal, AIR 1955 SC 425; Union of India v. T.R. Varma [1957-58] 13 FJR 237 (SC); AIR 1957 SC 882 State of U.P. v. Mohammad Nooh, AIR 1958 SC 86; K.S. Venkataraman and Co. P. Ltd. v. State of Madras [1966] 60 ITR 112 (SC); AIR 1966 SC 1089, have held that article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision could not be adopted. In Harbans Lal Sahnia v. IOC Ltd. [2003] 2 SCC 107 the hon'ble Supreme Court has held that the rule of exclusio....
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....orities seek to assume jurisdiction which they do not possess or act in a totally arbitrary manner. The decision in GKN Drive-shafts (India) Ltd. [2003] 259 ITR 19 (SC) reminds the assessee that when a notice under section 148 of the Act is issued the proper course of action is to file a reply with his objections including those in relation to the absence of jurisdiction. However, it does not lay down that when such an objection is in relation to the absence of jurisdiction and the same is revealed ex facie or apparent on the fact of a notice or reasons in support thereof, the assessee has compulsorily to invite an order from the Assessing Officer in relation to the absence of jurisdiction. This court in Civil Miscellaneous Writ Petition No. 257 of 2004 (Indra Prastha Chemicals P. Ltd. v. CIT [2004] 271 ITR 113) decided on August 16. 2004, has repelled the similar arguments raised by the Department. Thus, it is well-settled that the "reason to believe" under section 147 must be held in good faith and should have a rational connection and relevant bearing on the formation of the belief and should not be extraneous or irrelevant. Further this court in proceedings under article ....
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....hat any valuable article or thing was in the possession of the petitioner in his individual capacity as a necessary consequence, the mere mention of residential premises did not enable the Department to effect seizure either of gold, jewellery or other articles or documents belonging to the partner from such premises and, therefore, the order of assessment passed under section 132(5) of the Act was not valid and liable to be quashed. In the case of Southern Herbals Ltd. [1994] 207 ITR 55 the Karnataka High Court has held that it is not for the court to examine the sufficiency of the material leading to the belief of the authority that search shall have to be conducted: the court has to see that the belief was reasonable, in the sense, it was formed on the basis of relevant material (information): the court cannot substitute its own opinion as to the reasonableness of the belief. The court has to examine to see whether the belief is an irrational or blind belief, formed out of prejudice or the result of relying on wild gossip or baseless rumours, etc. In the case of Naresh Kumar Kohli [2004] 266 ITR 553 the Punjab and Haryana High Court has held that sub-section (3) of section....
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....s return to Prem Chandra Jain, can be claimed by the petitioners from the said Prem Chandra Jain. All the aforesaid decisions cited by learned counsel for the petitioner relate to search, validity of search and seizure, which is not in issue in the present writ petitions. In the case of Lalji Haridas [1961] 43 ITR 387 the apex court has held that in cases where it appears to the income-tax authorities that certain income has been received during the relevant year but it is not clear who has received that income; and, prima facie, it appears that the income may have been received by A or by B or by both together, it would be open to, the income-tax authorities to determine the question who is responsible to pay tax by taking assessment proceedings both against A and B. In the case of S. Gyani Ram and Co. [1963] 47 ITR 472 this court has held that the mere fact that a particular income has been assessed in the hands of a particular person as his income will not prevent the Income-tax Officer from coming to the conclusion on fresh materials that that income is the income of another person and taking proceedings under section 34 of the Act for reassessment against the latter on t....
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....hose hands a particular income is to be assessed, the assessing authority is entitled to have recourse to making a protective assessment in the case of one and a regular assessment does not affect the validity of the other assessment inasmuch as if ultimately one of the entities is really found to be liable to assessment, then the assessment in the hands of the entity alone remains the effective assessment and the other becomes infructuous. The levy is enforceable only under one assessment and not under both. In the case of Oil and Natural Gas Corporation Ltd. [2003] 262 ITR 648 the Uttaranchal High Court has held that the assessee having disclosed all facts about borrowings and investments in public sector undertakings and the fact that there was no cautious consideration of the pointed facts at the time of assessment that could not be a ground for reopening of assessment by virtue of the proviso to section 147 of the Act. In the case of V.K. Packaging Industries [2004] 266 ITR 283 this court has observed that before parting with the case we would like to state that we cannot appreciate this practice of the Income-tax Department of hurriedly passing assessment orders shortly....