TaxTMI 
TaxTMI 
2002 (9) TMI 95
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....half of the clients of the petitioner. Apart from the aforesaid businesses of acting as the agent of airlines and of hotels, the writ petitioner, also carries on business of tour operation. The writ petitioner, however, receives only the amount of commission, which the writ petitioner is entitled to receive from the said airlines and the hotels for rendering its services as the agent. (b) Section 80HHD of the Income-tax Act, 1961, was inserted by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989, inter alia, for allowing deductions in respect of the earnings in convertible foreign exchange in respect of the business of a hotel or of a tour operator. In subsection (6) of the said section it has been provided that any deduction under the said section shall not be admissible unless the assessee furnishes, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed. (c) The writ petitioner duly filed its returns of income in respect of the assessment years 1989-90, 1990-91 and 1991-92 and in each of the said assessment years, the w....
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.... assessment has been made under sub-section (3) of section 143 of the said Act, no action can be taken unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. The provisions of section 147 of the said Act, it is argued by Mr. R. N. Bajoria, do not contemplate a review on account of failure of the Assessing Officer in doing his duties. Finally, it is argued by Mr. Bajoria that unless those conditions are satisfied, the Assessing Officer gets no jurisdiction to issue notices. Mr. Mukherjee and Mr. Nizamuddin, the learned advocates appearing for the Revenue, however, argued that where the statutory authority issuing show-cause notice has the jurisdiction to do so and where the party has the opportunity to explain the show-cause notice, such notice cannot and should not be quashed by the High Court at the very threshold in the exercise of the power under article 226 of the Constitution of India. The said learned advocates cited the decision in the case of Indo Asahi Glass Company v. ITO [1996] 222 ITR 5....
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....d it could not be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The Income-tax Officer had all the material facts before him when he made the original assessment. He could not now take recourse to section 147 to remedy the error resulting from his own oversight. In Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1, the apex court observed: "It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest ....
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....able to be struck down as invalid." In Indian Oil Corporation v. ITO [1986] 159 ITR 956 (SC), it was observed that it was well settled now by the several authorities of the apex court and of several High Courts that there must be materials to come to the conclusion that there was omission or failure to disclose fully and truly all material facts necessary for the assessment of the year. It demanded a duty on every assessee to disclose fully and truly all the material facts necessary for the assessment. Therefore, the obligation was to disclose facts; secondly, those which were material; thirdly, the disclosure must be full and, fourthly true. What facts were material and necessary for assessment would differ from case to case. In every assessment proceedings, for computing or determining the proper tax due from the assessee, it was necessary to know all the facts, which could help the assessing authority in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as to certain other facts. But one of the ....
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.... expenditure or a deduction was wrongly allowed while computing the taxable income of the assessee, the same could not be brought to tax by reopening the assessment merely on account of subsequently the Assessing Officer forming an opinion that earlier he had erred in allowing the expenditure or the deduction. (5) If a notice under section 148 has been issued without the jurisdictional foundation under section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction and liable to be struck down in exercise of writ jurisdiction of the High Court, if reason to believe was available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available, but in case of absence of jurisdiction in the Assessing Officer to initiate the proceeding under section 147 of the said Act, the writ court will surely exercise its power of judicial review. In the background of such settled position, let me now consider the reasons recorded for reopening of the assessments. The said reasons are as under: "Deduction under section 80HHD is allowable on total profit of the busine....
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....sons for reopening the assessments it has not been alleged that there has 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 is not even noted in the recorded reasons as to what other primary facts were required to be disclosed by the assessee before the Assessing Officer at the time of assessments made under sub-section (3) of section 143, 1 am, therefore, clearly of the view that the assessee disclosed all the primary facts before the Assessing Officer at the time of original assessments under sub-section (3) of section 143 of the Act and there was no omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment for those assessment years. Therefore, the notice issued under section 148 was illegal and without jurisdiction as the conditions precedent to reopen the assessment are not available in the recorded reasons. I hold that no income chargeable to tax had escaped assessment for those assessment years due to failure of the assessee to disclose fully and truly all material facts necessary for its ....