AI Drafter 
TaxTMI 
TaxTMI 
2003 (12) TMI 23
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...., declaring an income of Rs. 10,36,147. The return was accompanied by the statutory audit report and the audited statements of account. In the profit and loss account statement, professional income had been declared at Rs. 3,53,08,960. While computing the taxable income, deduction under section 80-O of the Act was claimed at Rs. 1,76,54,480, i.e., at the rate of 50 per cent, of the total professional income of Rs. 3,53,08,960. The return was processed under section 143(1)(a) of the Act and the necessary intimation dated July 18,1996, issued to the assessee. Thereafter, the case was selected for scrutiny and requisite notices under sections 143(2) and 142(1) of the Act, dated August 2, 1996, were issued. A questionnaire dated August 2, 1996, was also issued requiring the assessee to furnish various details. The assessment was ultimately completed under section 143(3) of the Act vide order dated March 30, 1997, at a total income of Rs. 16,12,230. The difference in the returned income and the assessed income represented various disallowances made by the Assessing Officer. However, deduction under section 80-O of the Act was allowed as claimed at Rs. 1,76,54,480. On March 22, 2002, ....
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....in Jindal Photo Films Ltd. v. Deputy CIT [1998] 234 ITR 170. Reliance was also placed on various other judicial pronouncements. A copy of the news item published in the Economic Times, New Delhi, dated December 26, 2002, was also enclosed with this letter, wherein it has been reported that the Bombay High Court in the case of CIT v. Asian Cables Corporation Ltd. (No. 1) [2003] 262 ITR 535 had held that the deduction under section 80-O of the Act was allowable on the gross income and not on the net income. The assessee addressed a further letter to the Assessing Officer, dated March 6, 2003, requesting him to first dispose of his objections raised against the initiation of proceedings under section 147 of the Act, in view of the law laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19. He also brought to his notice the judgment of the Delhi High Court rendered in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 [FB], wherein it has been held that the allegation about escapement of income based on a mere change of opinion is outside the scope of section 148 of the Act. The Assessing Officer, vide order dated March 13, 2003, overruled the objectio....
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....the order passed by the Assessing Officer dated March 13, 2003, clearly shows that there is no allegation against the assessee that he had failed to disclose fully and truly all material facts necessary for his assessment. Thus, according to him, in the absence of such a finding, the proceedings under section 147 of the Act could not be initiated after the expiry of four years from the end of the assessment year 1995-96. Dr. N. L. Sharda, learned counsel for the Revenue, supported the order of the Assessing Officer. He, however, on a pointed query from the Bench fairly conceded that in the reasons recorded by the Assessing Officer, there was no allegation about the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment nor was such a finding available in the order passed by him on March 13, 2003. We have heard learned counsel for the parties and have also perused the relevant material. Before issuing the impugned notice under section 148 of the Act, the Assessing Officer had recorded the following reasons as required under sub-section (2) of section 148 of the Act: "The examination of assessment records reveals that ....
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....person in respect of which he is assessable under 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." A bare perusal of the above provision shows that the power to assess or reassess the escaped income for any assessment year has been conferred upon the Assessing Officer subject to the provisions of sections 148 to 153 of the Act, only, if he has reason(s) to believe that the income chargeable to tax has escaped assessment. However, the proviso places a further restriction on this power in cases where assessments un....
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....rt of the assessee to file a return of income or to disclose fully and truly all material facts necessary for his assessment." Section 148 deals with the requirement of issue of notice: Sections 149 and 150 deals with the time within which a notice under section 148 can be issued: Section 151 deals with the requirements of sanction of a statutory authority before issue of notice: Section 152 provides for rates applicable for levy of tax and section 153 prescribes the time-limit for completion of assessment and reassessment under section 147 of the Act. Thus, sections 148 to 153 come into play only after the Assessing Officer assumes valid jurisdiction under section 147 of the Act. The basic question for determination in the present case, therefore, is as to whether the Assessing Officer had validly assumed jurisdiction under section 147 of the Act. It is not in dispute that the assessee had duly filed his return of income under section 139 of the Act on October 16,1995. It is also not in dispute that the assessment under section 143(3) of the Act had been completed on March 30,1997. It is also clear that the jurisdiction under section 147 of the Act was invoked by recording r....
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.... the proviso namely, that there has been a failure on the part of the assessee to make a return under section 139 or in response to a notice issued under section 142 or section 148 or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Unless, the condition in the proviso is satisfied, the Assessing Officer does not acquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire proceedings. The relevant words in the proviso are, ' . . . . unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee . . .' Mere escape of income is insufficient to justify the initiation of action after the exp....
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....e business, the assessee had taken gross receipt of foreign exchange plus net receipt of domestic business in respect of commission/ service charges. Thus, it was claimed that the assessee had claimed excess deduction under section 80HHD. The High Court observed that where expressly deduction under section 80HHD was claimed and it was examined and granted by the assessing authority, there could be no omission or failure on the part of the assessee to disclose any material fact necessary for the assessment. It has been further observed that in the reasons for reopening the assessments, it had not been alleged that there had been any omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessments for those assessment years. It has been further observed that it was not even noted in the recorded reasons as to what other primary facts were required to be disclosed by the assessee. The notice under section 148 and the proceedings relating thereto were, accordingly, quashed. In view of the above, we are of the considered view that the notice under section 148, dated March 22, 2002 (annexure P2), cannot be sustained. W....