High Court Of Calcutta
Geo Miller & Co. Ltd. vs. DCIT & Ors.
Sections 147, 148
Asst. Year 1985-86, 1986-87, 1987-88, 1988-89, 1989-90
Pinaki Chandra Ghose, J.
Matter No. 2489 of 1994
28th November, 2001
JUDGMENT
PINAKI CHANDRA GHOSE, J. :
This is an application inter alia challenging the notices issued under s. 148 of the IT Act, 1961 (hereinafter referred to as the said Act) for the asst. yrs. 1985-86 to 1989-90.
The application was moved before this Hon’ble Court on 26th Sept., 1994, when His Lordship Ruma Pal, J. was pleased to direct that the ITO will be at liberty to proceed with the hearing of the notice under s. 148 of the said Act and pass a final order but the same shall not be given effect to or communicated to the petitioner till 15th Jan., 1995, or until further orders of this Court whichever is earlier. Directions for affidavits were also given and the affidavits have been filed and the matter has come before this Court for final hearing.
2. Facts of the case briefly are as follows : Respondents issued five notices all dt. 29th July, 1994, under s. 148 of the said Act for reopening the assessment under s. 147 of the said Act for asst. yrs. 1985-86 to 1989-90. The petitioner is carrying on its business of commissioning of plant for treatment of industrial wastage, effluents and for softening of water. According to the petitioner, the petitioner was assessed for the asst. yr. 1985-86 to 1989-90 under s. 143(1)(a) and also under s. 143(3) of the said Act. The petitioner was treated by the respondents as an ‘industrial company’. The Income-tax Officer (hereinafter referred to as ITO), who had the jurisdiction over the petitioner-company being satisfied allowed the deduction under s. 80HH of the said Act upto the asst. yr. 1987-88. The claim for deductions made under s. 80HH, under s. 32AB, under s. 80HHC were also allowed for the asst. yrs. 1988-89 and 1989-90. Appeals were preferred and finally the Tribunal dismissed the appeal for the asst. yrs. 1985-86 and 1986-87 and appeals for the asst. yrs. 1988-89 and 1989-90 were preferred firstly, but since the deductions under ss. 80HH and 32AB of the said Act were allowed, no appeal was preferred.
The case of the petitioner that there was no omission or failure on the part of the petitioner or disclose fully or truly all material facts necessary for claiming deduction and all primary facts relating to the drawing legal inference by the ITO, were before him. Accordingly, it is submitted that all proceedings for reopening the assessments are illegal, invalid and without jurisdiction.
3. Dr. Pal appearing on behalf of the petitioner relied upon a judgment Calcutta Discount Co. Ltd. vs. ITO & Anr. AIR 1961 SC 362 : (1961) 41 ITR 191 (SC) : TC 51R.779 and contended that the conditions precedent to the exercise of jurisdiction under s. 34 of the IT Act, 1922, did not exist. Therefore, the ITO had no jurisdiction to issue the impugned notices under s. 34 in respect of the assessment years after the expiry of four years. He also relied upon another judgment Indra Co. Ltd. vs. ITO (1971) 80 ITR 559 (Cal) : TC 51R.1210 and contended that there was no failure to disclose any material facts for the purpose of the assessment, so far as the loss arising from the bonus shares was concerned, s. 147(a) could not be invoked and the notice must be struck down. His further contention that mere change of opinion cannot be a valid ground for reopening an assessment under s. 34(1)(b) of the IT Act, 1922. In support of such submission he relied upon a judgment CIT vs. Dinesh Chandra II, Shah & Ors. (1971) 82 ITR 367 (SC) : TC 51R.1434. He further relief upon another judgment ITO vs. British Paints Ltd. Ltd. (1979) 118 ITR 878 (Cal) : TC 51R.946 and contended that all the primary facts for the purpose of the assessment were disclosed by the assessee and on those facts the ITO who made the assessment was satisfied that the method of valuation adopted by the assessee was the correct method. Subsequently, a different view cannot be taken in respect of the method of valuation adopted by the assessee declaring the same as incorrect method. Therefore, the reopening of the proceeding under s. 147(a) and issue of notices under s. 148 for the assessment years were not valid. He also relied upon judgments Andhra Bank Ltd. vs. CIT (1997) 140 CTR (SC) 334 : (1997) 225 ITR 447 (SC) : TC S51.4047, Biswanath Samanta vs. ITO (1973) 92 ITR 331 (Cal) : TC 51R.1069, J.C. Mukherjee & Ors. vs. ITO & Ors. (1992) 198 ITR 748 (Cal) : TC 51R.2078, on the same point. He further contended that the circulars issued by the Central Board of Revenue would be binding on all officers and persons employed in the execution of the IT Act and in support of his submission he relied upon a judgment Navnit Lal C. Javeri vs. K.K. Sen, AAC (1965) 56 ITR 198 (SC) : TC 41R.238. He further contended that reasons are not relevant for the reopening of assessment as the reasons have no rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there shall be direct nexus or live-link between the material coming to the notice of the ITO and the formation of his belief that there has been escapement of income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. In support of such submission he relied upon a judgment ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC) : TC 51R.598. He also relied upon another judgment Panchanan Hati vs. CIT (1997) 9 CTR (Cal) 228 : (1979) 115 ITR 336 (Cal) : TC 51R.719. He also contended that the notice itself was bad in law, there was no reason to carry on with the futile exercise of completion of reassessment proceedings. In support of such submission he relied upon a judgment Jayshree Tea & Industries Ltd. vs. Dy. CIT & Ors. (2001) 165 CTR (Cal) 193 : (2000) 245 ITR 567 (Cal). He lastly contended that if the ITO did not have any jurisdiction to issue the impugned notices the writ Court can always interfere irrespective of the fact whether the assessment pursuant to such notice has been made or not. In support of such submission he also relied upon a judgment ITO & Ors. vs. Santosh Kr. Dalmia (1994) 121 CTR (Cal) 17 : (1994) 208 ITR 337 (Cal) : TC 51R.1161.
4. Learned counsel appearing on behalf of the respondents contended before me that this writ petition is not maintainable on the ground that there is an alternative remedy and a more satisfactory solution is available on the terms of the statute itself. He relied upon a judgment Shyam Kishore & Ors. vs. Municipal Corpn. of Delhi & Anr. AIR 1992 SC 2279 in support of such contention. He further relied upon another judgment CIT vs. N.C. Budharaja & Co. & Ors. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC) : TC 28R.233 and submitted that the Hon’ble Supreme Court has categorically held that an article used in s. 32AB and s. 80HH refers only to movable assets and the word “manufacture or construction of an article” cannot be extended to construction of road, building and bridge, etc. Accordingly, he submitted that the ratio of the decision would also apply to the provisions of s. 32AB of the said Act. According to him, the said decision has also been reaffirmed by the Hon’ble Supreme Court in the case of Builders Association of India & Ors. vs. Union of India & Ors. (1994) 122 CTR (SC) 543 : (1994) 209 ITR 877 (SC) : TC 28R.240. Under these facts and circumstances of this case he submitted that the petitioner has failed to disclose truly and faithfully before the ITO. He also relied upon another judgment Laxmanrao Narayanrao vs. Appropriate Authority (1996) 132 CTR (Guj) 518 : (1996) 220 ITR 537 (Guj) : TC S3.259 and submitted that the petitioner has enough opportunity to explain his case before the AO. He further contended in this circumstance that the AO has reason to believe that the income has escaped assessment and as such the notice has been issued by the AO and accordingly he submitted that the said notice is valid, legal and the same is sustainable in law.
5. After considering the facts and circumstances of this case I do not have any doubt in my mind that the petitioner has ample opportunity to come before the authority as the interim order has specifically stated that the ITO shall proceed in the matter and also pass a final order but the same shall not be given effect to or communicated to the petitioner till 15th Jan., 1995, or until further orders of this Court whichever is earlier. As it appears in this matter that time for passing of final order is also expired. The petitioner had ample opportunity to place its facts before the AO. I further do not have hesitation to come to the conclusion as has been held by the Hon’ble Supreme Court in a case Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC) where the Hon’ble Supreme Court held that the Court should not probe into the details at this stage and I further after coming through the facts and circumstances of this case do not find that the AO has been issued the said notice without any jurisdiction. Therefore, notice has been issued by the AO is legal and valid. I further do not have hesitation to hold that the Court at this stage shall not probe into the matter in respect of the reason to issue said notice as has been held by the Hon’ble apex Court. It further appears to me that since at the time of moving of this application His Lordships Ruma Pal, J had already given authority to ITO to proceed with the hearing of the notice, it would be proper for me at this stage to direct the AO to pass the order and to communicate the same to the petitioner within three weeks from date in accordance with order passed by His Lordship Ruma Pal, J. The petitioner shall be at liberty to take such steps in the matter as may be advised in accordance with law before the appropriate forum.
For the reasons stated hereinabove, this application is thus disposed of.
[Citation : 254 ITR 620]