TaxTMI 
TaxTMI 
2009 (9) TMI 17
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....itioner is that for the Assessment Years 1977-1978 to 1982-1983, it duly submitted its return of income along with complete details necessary for making the assessments. The assessments orders were thereafter passed under Section 143(3) of the Act for these Assessments Years. After scrutiny of the returns for 1981-82 and 1982-83, the respondents have issued the impugned notices under Section 147/148 of the Act on 24.2.1986 for the six Assessment years thereby reopening the completed assessments. As stated above, the reasons have already been furnished by the respondents in their counter-affidavit and the challenge is now to the fact that the reasons given for reopening of the assessments amount to nothing but a change of opinion in as much as there are no new materials on the basis of which reopening of the assessments can be initiated. 3. The relevant provisions of Section 147 and 148 as applicable for the relevant assessment years read as under:- "Income escaping assessment. 147. If- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Incom....
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....f there is a mere change of opinion without sufficient material for reopening of the assessments, the same is illegal. The counsel for the petitioner has taken us through the reasons which have been given for reopening of the assessments and which have been filed as Annexure R-16 to R-20 along with the counter affidavit. The said reasons are given separately for each assessment years. We reproduce now these reasons for each of the assessment years which are sought to be under Section 147 as under:- (Assessment Years 1977-78) "Reasons: It has come to my notice that the assessee introduced cash credit in the assessment year under consideration amounting to Rs.3,82,592/-. The genuineness of these cash credits has not been proved by the assessee despite several opportunities given. I have, therefore, reason to believe that on account of commission or failure on the part of the assessee to disclose fully and truly material facts of its income to the extent of Rs.3,82,592/- has escaped assessment. As per attached letter No. 779 dated 21.2.1986 it is evident that the assessee has introduced his undisclosed income in the form of bogus cash credits. In view of the above facts, I ha....
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....the assessee despite several opportunities given. I have, therefore, reason to believe that on account of omission or failure on the part of the assessee to disclose fully and truly material facts of its income to the extent of Rs.6,10,075/- has escaped assessment. As per attached letter No. 779 dated 21.2.1986 it is evident that the assessee has introduced his undisclosed income in the form of bogus cash credits. In view of the above facts, I have reason to believe that income to the extent of Rs. 6,10,075 has escaped assessment. Necessary approval to reopen the assessment may kindly be accorded. Dated: 21.2.1986 (Mridula Ghosh) Income-tax Officer, Coy. Cir.XXIV, New Delhi."(Emphasis added) (Assessment Year 1981-1982 and 1982-1983) M/s Diwakar Engineers Ltd., B-65/1 W.P.Indl. Area, Delhi. Assessment years: 1981-82 and 82-83 Brief Reasons for taking action U/s 148 of the I.T.Act in above mentioned assessment Years. During assessment proceedings in the case of above assessee M/s Diwakar Engineers Ltd. for the assessment year 1983-84, it was observed that interest amounting to Rs.1,76,370 debited in the earlier years to the account of certain parties was cr....
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.... of the party. No satisfactory reply had been furnished by the assessee company. The amounts of loan as per assessment record for assessment year 1981-82 and 82-83 are as under: Assessment Year Unsecured loan 1981-82 Rs.7,56,783/- 1982-83 Rs.9,05,004/- Section 147(a) of the I.T. Act states- "If the Income-tax Officer has the reason to believe that, by reason of omission or failure on the part of the assessee to make a return u/s 139 for any assessment year to the Income-tax Officer, or to disclose fully and truly all material facts necessary for assessment year for that year, income chargeable to tax has escaped assessment for that year." In my opinion prima facie, grounds exists for taking action u/s 148 since the assessee has failed to disclose fully and truly all material facts necessary for its assessment for the assessment years under consideration. It has been held that when primary facts disclosed by the assessee are incorrect, action u/s 147(a) is correct. Considering the above facts, Notice u/s 148 is being issued in the case. (Mridula Ghosh) Income-tax Officer, Coy. Cir.XXIV, New Delhi." (Emphasis added) 5. The counse....
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....f Income Tax, W.B. (a copy of the said letter is also enclosed for ready reference). As regards other deposits, enquiries are being conducted at this end. Those will be sent very soon. (Ranen De) Encl. Two letters. Income Tax Officer/INV-IV, Calcutta." "OFFICE OF THE INCOME TAX OFFICER: SSC-VIII, 169, A.J.C. Bose Road: Calcutta-14. Income Tax Officer, Company Circle-XXIV, 4th Floor, C.R. Building, New Delhi. Sub: Confirmation of deposition by M/s/ Eastern Trading Co.,(SSC- VIII/300- E/B) of 58/1/D, B.T. Road, Calcutta-35-matter regarding in the assessment of your assessee M/s. Diwakar Engineers Ltd., Assessment Year 1983-84. Ref: Your letter No. ITO/712/dated 3-2-1980. Please refer to above. On scrutiny of assessment of my above named assessee, it appears that the assessment for 1979-80 (Year ending 31.3.1979) was completed in the status of URF on a duplicate return u/s 143(3) on 24-2-1981 on a total income of Rs.10,700/-. The main source of income as stated in the assessment order is from commission and interest. The balance sheet as on 31-3-1979 shows a meagre total of Rs.21,018/- inclusive of Loan and Advance of Rs.11,200/- in the ass....
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....s income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147 (a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only qu....
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.... of the assessee to disclose fully and truly all material facts necessary as a result of which income chargeable to tax has escaped assessment. 10. One of the contentions which has been raised by the counsel for the petitioner is that the impugned notices have been issued under Section 147(a) and therefore, it is impermissible to refer to ingredients of Section 147(b) to sustain the notices. He has further urged that the grounds which have been stated for reopening of the assessment years 1981-82 and 1982-1983 are different than the reasons for the assessment years 1977-1978 to 1980-1981. We, however, find that this argument is not correct because in each of the reasons given for the assessment years 1977-1978, to 1980-1981, it is said as under:- " I have, therefore, reason to believe that on account of omission or failure on the part of the assessee to disclose fully and truly material facts of its income to the extent of Rs.6,10,075/- has escaped assessment. As per attached letter No. 779 dated 21.2.1986 it is evident that the assessee has introduced his undisclosed income in the form of bogus cash credits." (Emphasis added) 11. It is clear that while recording the reaso....