TaxTMI 
TaxTMI 
2009 (7) TMI 103
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.... the subject matter of challenge in W.A.Nos.766 and 767 of 2005. 2. The writ petitioner was issued with a notice dated 18.11.2004, under Section 148 of the Act calling upon him to file return of income in the prescribed format for the assessment year 2000-01, as the assessing authority had a 'reason to believe' that his income in respect of the said assessment year chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. Closely followed by that, by an order dated 25.11.2004, purported to have been passed under Section 281B of the Act, the deposits held by the writ petitioner in the Union Bank of India, T.Nagar, Chennai - 600 017 under Capital Gain Scheme (in short 'CGS') to an extent of more than Rs.15 crores, was provisionally attached. The said order came to be passed with the approval of the Commissioner of Income Tax. In pursuance of the notice issued under Section 148, the first respondent herein, viz., the writ petitioner filed his return of income along with the statement. In the schedule filed along with the said statement, it was specifically claimed, as regards the alleged escaped income, as provided from sale of shares of S.S.I. Limited ....
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.... assessee, the Auditors again filed five more objections to the notice issued under Section 148/147 of the Act. 5. The appellant, by its order dated 21.3.2005, while rejecting the various objections in seriatim, concluded that the assessment proceedings for the assessment year 2000-01 have been validly reopened under Section 147 of the Act and the said order was passed after considering the objections submitted by the assessee, by a speaking order. It was at that stage, i.e. on 28.3.2005, the assessee filed the present writ petitions seeking to challenge the notice issued under Section 148 dated 18.11.2004 and the provisional order of attachment passed under Section 281B of the Act. 6. It is relevant to state that in the affidavit filed in support of the writ petitions, the assessee has specifically referred to the order dated 21.3.2005 rejecting the various objections raised by him and ultimately holding that the reassessment proceedings were validly made. While the writ petitions came up for admission on 31.3.2005, the same came to be straightaway allowed setting aside the notice issued under Section 148 dated 18.11.2004 as well as the consequential proceedings of provision....
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.... 147/148 of the Act. The learned counsel relied upon very many decisions in support of his submissions. 9. As against the above submissions, Mr. R. Krishnamoorthy, learned Senior Counsel appearing for the respondents/assessees raised a preliminary objection that when once the learned single Judge passed orders based on the concession made by the learned Standing Counsel, the appellant cannot be allowed to challenge the said order by filing this appeal. The learned Senior Counsel, however, proceeded to make his submission on the merits of the case and contended that there could have been no "reasonable belief" for the appellant to initiate reassessment proceedings. The learned Senior counsel, therefore, contended that setting aside the impugned proceedings by the learned single Judge was well justified and the same does not call for interference. The learned Senior Counsel placed reliance upon various decisions in support of his submissions. 10. Having heard the learned Standing Counsel for the appellant and the learned Senior Counsel for the respondents and after having perused the various materials placed before us as well as the order of the learned single Judge, at the out....
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....ssued to the transporters. 10. Although the order dated 3-3-1997 was based on the assurance given by the Senior Advocate appearing for the State the order will have to be recalled. An advocate appearing on behalf of the State cannot undertake that the State will do something contrary to the statute. Therefore, this application is allowed. We will recall the order passed on 3-3-1997 and restore the I.A.2 of 1996 for hearing and disposal. These applications are disposed of as above. There will be no order as to costs." Again, in the decision reported in AIR 1998 SC 1681 (Uptron India Ltd. v. Shammi Bhan), the Supreme Court has stated the legal position as under:- "23. In view of this observation, the question whether the stipulation for automatic termination of services of overstaying the leave would be legally bad or not, was not decided by this Court in the judgement relied upon by Mr. Manoj Swarup. In that judgment the grounds on which the interference was made were different. The judgment of the High Court was set aside on the ground that it could not decide the disputed question of fact in a writ petition and the matter should have been better left to be decided by the ....
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....cannot enure to the benefit of any party. 13. This Court in Uptron India Ltd. v. Shammit Bhan AIR 1998 SC 1681: (1998 AIR SCW 1447: 1998 Lab IC 1545: 1998 All LJ 1099) pointed out that a wrong concession on question of law made by counsel is not binding on his client and such concession cannot constitute a just ground for a binding precedent." (Emphasis added) In the decision reported in (2004) 3 SCC 628 (Union of India v. Mohanlal Likumal Punjabi), the Hon'ble Supreme Court has stated the legal position as under:- "8. We shall first deal with the effect of concession, if any, made by learned counsel appearing for the present appellants before the High Court. Closer reading of the High Court's order shows that the High Court took the view that in view of the revocation of the order on 19-12-1994 and the order passed by the High Court on 11-1-1995, no further order could have been passed under Section 7 of the SAFEMA. After having expressed this view, the so-called concession is recorded. In our view the concession, if any, is really of no consequence, because the wrong concession made by a counsel cannot bind the parties when statutory provisions clearly provided otherwise....
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....(Roop Kumar v. Mohan Thedani) and (iii) AIR 1982 SC 1249 (State of Maharashtra v. Ramdas Shrinivas Nayak). 13. In the decision reported in 2004 10 SCC 598, the Hon'ble Supreme Court, in paragraph 9 of the said judgment, has held that where the High Court has specifically recorded to the effect that only two points were urged before it, in order to ascertain as to what transpired in the Court, the record in the judgment of the Court should be taken as a conclusive proof and no one should be allowed to contradict such statement on an affidavit or by other evidence. It was further held that if a party wanted to take a stand that what was recorded was erroneous, the party should approach the concerned Court for making any rectification and it is not open to the party to contend contrary to what has been recorded before the Hon'ble Supreme Court. 14. In the decision reported in AIR 2003 SC 2418, it was again reiterated in paragraph No.11 that it is not open to a party to turn around and take a plea that no concession was given. which would amount to a case of sitting on the fence, which should not be encouraged. It was again stated that if really there was no concession, the only ....
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.... that case had pointed out the true position, the learned single Judge would not have granted relief in favour of the respondent. It was further held that if the counsel had made an attempt to give concession inadvertently or under a mistaken impression of law, it would not be binding on the client and the same cannot any how benefit any party. The said decision was followed again by the Hon'ble Supreme Court in the decision reported in AIR 2001 SC 2306. In the decision reported in (2004) 3 SCC 628, the Hon'ble Supreme Court had gone one step further and has held that applicability of the statute or otherwise to a given situation or the question of statutory liability of a person/institution under any provision of law could invariably depend upon the scope and meaning of the provisions and has got to be adjudged not on any concession; that any such concessions would have no acceptability or relevance while determining the rights and liabilities incurred or acquired in view of the axiomatic principle that there can be no estoppel against the statute. 18. A cumulative consideration of the above principles set out in the various decisions would make it clear that in the normal cour....
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.... the factual situation inasmuch as the so-called concession as recorded by the learned single Judge was stated to be on the basis of various objections raised by the assessee made on 27.12.2004, 10.02.2005 and 18.02.2005, which according to the respondents, were not considered in the order dated 21.3.2005. On the contrary, the order dated 21.3.2005 runs to as many as nine pages and a cursory glance of the said order discloses that there were consideration of the objections in seriatim in the said order. Moreover, for issuing the proceedings under Section 147/148 of the Act, the relevant criteria to be seen is as to whether there was a 'reasonable belief' available for the assessing authority for making a reassessment. Unfortunately, the said legal requirement, with reference to issuance of reassessment proceedings, was never considered nor examined as to whether the concession made by the learned counsel would cover such a legal principle relating to issuance of reassessment proceedings. If that be so, applying the settled legal position that based on a wrong concession on question of law made by a counsel, the same will not bind the party, the so-called concession, cannot be the b....
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....tice. In our considered opinion, having regard to the legal effect of Section 148 notice dated 18.11.2004 and the consequent developments that had taken place in which, the writ petitioner have travelled to a very long distance, it is a fit case where, the appellant should be permitted to contest the writ petition on merits and examine the claim of the writ petitioner in making a challenge to the said notice. 22. As far as the so-called over statement said to have been made with reference to Section 271(1)(c) of the Act, about which the learned Standing Counsel is stated to have made a concession, it can be safely held that at that stage, even assuming that such an excess statement found in the order dated 10.2.2005 was uncalled for, the same cannot in any way whittle down the effect of Section 148 notice or provide any valid ground for interfering with the notice issued under Section 148 of the Act, unless it is held that there was no basis for the 'reasonable belief' for issuance of the said notice. 23. At this juncture, it is necessary to refer to the conduct of the respondent/assessee in having moved the writ petitions befor....
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....4. As far as merits of the case is concerned, we do not find any merit at all in the case of the assessee while seeking to challenge the preliminary notice dated 18.11.2004. When we make a reference to the various proceedings commencing from the issuance of the notice dated 18.11.2004, we find that after receipt of the said notice, the assessee filed the return of income in compliance with the demand made in the notice dated 18.11.2004. The return of income was filed on 21.11.2004 along with the statement of total income, tax particulars and the balance sheet as on 31.03.2000. 25. Before delving deep into the issue, which resulted in the issuance of the notice under Section 148, it would be worthwhile to state briefly the circumstances which necessitated the appellant to issue notice under Section 148 of the Act. According to the appellant, there was a sale of shares of the assessee's company, viz., SSI Limited, in which assessees were the promoters themselves. The total number of shares in respect of the petitioners were around 2,34,000/-. The allegation was that the assessees sold those shares on 22.10.1999 to third parties namely, Mr. S. Venkatesh, Ms. V. Kalai Selvi and Mr.K....
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....have been known. (ix) If section 54EA is applied for claiming exemption from payment of capital gain tax, the investment should be made only in specified securities and the deposits with scheduled banks was not a specified security under Section 54EA. (x) Notice under Section 154 was issued to disallow the claim under Section 54EA on 09.09.2004. (xi) Assessee's representative filed a letter dated 17.09.2004, stating that it was wrongly claimed under Section 54EA instead of Section 54EB of the Act. (xii) The method of calculation filed along with the return of income was as prescribed under Section 54EA(i)(b) of the Act. (xiii) After the issuance of notice under Section 148, at the stage of filing of the return in response to the said notice, the respondent changed the method of computation of capital gains by following the method specified under Section 54EB(1)(b). (xiv) For the first time, after issuance of Section 148 notice, Bank Manager's letter dated 30.03.2000 was filed on 17.09.2004, stating that deposit for capital gains scheme should be kept for a period of seven years; that during that period no lien or loan can be availed on the security; that three yea....
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....y detailed objection came to be made on behalf of the assessee on 27.12.2004. In the said objections, on behalf of the assessee, it was stated that there was no valid reason to believe that the income liable to tax had escaped assessment, and therefore, the proceeding should be dropped. There were additional objections raised on behalf of the assessee on 10.01.2005. Subsequently, on 10.02.2005 the appellant furnished the statement of the Chief Manager, Union Bank of India, T.Nagar, Chennai, who was examined by SEBI. Further, objections were raised on 18.02.2005 running to several pages. 29. At this juncture, it would be worthwhile to refer to some of the statements made by the Chief Manager of Union Bank of India, which would throw much light as to the extent of alleged clandestine transactions indulged in by the assessee. On the one hand, while there was a prima-facie basis for the alleged clandestine deal indulged in by the assessees in the matter of disposal of the shares of SSI Limited, bank records with regard to the deposit made under the Capital Gain Scheme, disclosed further striking deficiencies in the handling of those receipts which were contrary to the statutory prov....
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....eferred FDR Accounts viz.2849, 2850, 2853, 2854, 2851 and 2852? Also, please explain why, in every case, these deposits have been split into two different amounts and renewed? Ans. Yes. Normally, we would either obtain a fresh application form or use the old application form and obtain necessary instructions therein from the applicant/client for renewal. In any case, we will obtain some written request from the client for renewal or opening of FDRs. Similarly, splitting of deposits into various denominations at the time of renewal will also be done only under the specific request of the client. Q.28 Can you produce copies of such written requests or applications, whichever the case may be, in respect of the FDR Account Nos.2849 to 2852? Ans. Yes. We will produce such written requests on or before 22.11.2004. Q.29 I am showing you copies of Secured Overdraft application forms dated 18.6.2004 of Sri K.S. Aghoram, Shri K.S. Ganesh and Shri K.S. Suresh, which are obtained from your branch. Please state what is the security on which the overdraft has been granted:- Ans. In the case of Shri K.S. Aghoram, overdraft has been obtained by him on the security of FDR of Rs.15 Cr....
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....nuing in same form, was created inadvertently in the above-referred letter dated 17.9.2004. Q.34 It is seen from records that there has been some attempt on the part of the branch of Union Bank of India, T.Nagar, Chennai to remove the lien placed on the above-mentioned FDRs and re-classify them as capital gains scheme deposits. What is the basis & authority for the bank to carry out such an action? Ans. The concerned party had taken the matter to the General Manager's office of the Bank. After discussions, a decision was taken and conveyed to us by the Office of the G.M. that the deposits may be renewed for a period of four years from 9.3.2003 so that technically the deposits would have been held for seven years. So, it was decided also to lift the lien on these FDRs. Q.35 As of now, have the party offered any other security for the S.O.D. limit enjoyed by them? Ans. It is still at the discussion stage and we may take some other security to cover the excess margin which results due to the release of lien on certain deposits. Q.36 It is seen from the records that you have issued FDR Receipts under CGS on 22.9.2004 with a remark that 'this is in continuation of deposit....
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....h any liability or lien during the said period of seven years. A reference to question No.29 and the answer by the Chief Manager disclose that in respect of Account No.2850, 2854 and 2852, over drafts were secured by all the three assesses. Similarly, a reference to question No.30 and the corresponding answer of the deponent disclose that based on the security of FDR Account Nos.2852, 2850 and 2854, loans were sanctioned and drawn by all the three assesses. This is apart from the fact that the deposits were not readily created for 7 full years at the initial stage itself. It was also highly doubtful whether the deposits were made in fulfilment of Section 54EA or 54EB. In fact, a perusal of the statement of the Chief Manager by itself would be sufficient to create necessary basis for the reason to believe to enable the appellant to proceed with the issuance of the notice under Section 148. In such circumstances, the order dated 21.03.2005 issued by the appellant rejecting the various objections raised on behalf of the assesses, in order to proceed with the reassessment based on the notice dated 18.11.2004, was perfectly justified. 33. As stated by us earlier, though the assessees....
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....ing with the said provision, the Hon'ble Supreme Court held that where the Income Tax Officer found out while examining the assessment relating to the subsequent year certain loans were found to be bogus, has observed as under:- "It is necessary to remember that we are at the stage of reopening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it is that the Income-tax Officer could have investigated the truth of the said assertion which he actually did in the subsequent assessment year but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. ...... Does it not furnish a reasonable ground for the Income-tax Officer to believe that on account of the failure indeed not a mere failure but a positive design to mislead of the assessee to discl....
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....nt of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso." (Emphasis added) 38. Therefore, applying the said legal position now as stipulated under Section 147/148 of the Act, it is not necessary for the appellant to establish to the entire satisfaction of the respondent reasonable belief based on which the notice came to be issued under Section 148. In fact, the Hon'ble Supreme Court has gone to the extent of saying that the confirmation of the belief by the assessing officer is within the realm of subjective satisfaction and what all to be satisfied is that there were enough materials to sup....
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.... return of income and thereafter submitting their objections at three different stages viz., the initial one after the receipt of the reasons furnished by the appellant, thereafter, after the receipt of the statement of the Manager of the Bank, and thereafter, the orders having been passed finally on 21.03.2005 and having chosen not to challenge the said proceedings, it was highly improper on the part of the assesses to have come forward with the present writ petitions in seeking to challenge the initial notice dated 18.11.2004 alone by merely contending that such objections were not duly considered by the appellant. 42. In fact, in the decision reported in 236 I.T.R 34, the Hon'ble Supreme Court has held that the Court can only consider whether there was a prima facie case for re-assessment and sufficiency of materials cannot be considered at that stage. The Supreme Court also pointed out that sufficiency or correctness of the material even after reopening cannot be challenged at that stage; that the assessee will always have the right to prove that the assumption of facts made in the notice was erroneous and that no new facts came to the knowledge of the income tax officer aft....