Jammu & Kashmir H.C : The assessment proceedings could be opened with regard to that period which is within limitation prescribed in this behalf.

High Court Of Jammu & Kashmir

Krishan Chand Ganesh Dass Girdharilal & Co. vs. Inspecting Assistant Commissioner & Ors.

Section 143(2)(b)

T.S. Doabia, J. Orig.

Writ Petn. No. 217 of 1988

11th December, 1998

Counsel Appeared

G.C. Sharma, for the Petitioner : B.B. Bakshi, for the Respondent


T.S. Doabia, J. :

The circumstances under which this petition has come to be filed be noticed. The petitioner is an assessee under the IT Act, 1961 (‘the Act’). It submitted its returns for the asst. yr. 1985-86. The assessment was made on 29th Nov., 1985. The income as indicated by the assessee was accepted. While making this assessment the AO took note of the past practice. This was followed. The total turnover, the taxable income, was determined by applying a fixed percentage of 11 per cent. The further fact is that on 15th Jan., 1987 a letter was addressed to the assessee. In this, it was pointed out that a search and seizure was conducted at the premises of the assessee. Some stock registers were seized. These registers indicated some facts and figures regarding closing stocks. The stock which was in transit was also said to have been indicated. On the basis of the information so acquired, the IAC Jammu, who is also the AO, came to the conclusion that if facts and figures which have become available from the records so seized from 1st Feb., 1972 to 31st Jan., 1985, are taken into consideration, then the total gross profits would be to the tune of Rs. 1,31,97,500.61. It was pointed out that for these years, the assessee has given the information that the profits were to the extent of Rs. 65,92,506.66 only. It is indicated that there is suppression in the gross profit to the tune of Rs. 66,84,993.95. This was in the period from 1st Feb., 1972 to 31st Jan., 1985. The assessee was called upon to explain the position.

It may be seen that the above letter does not indicate that this has been issued under any particular statutory provision. The assessee gave a reply. It was indicated that the facts and figures as are being projected by the IAC did not take notice of various factors. One such factor was that the loss in transit and the items which were in transit and are wasted, could not be mentioned in the accounts which are said to have been seized by therespondent Department. It was further stated that the facts and figures as given in the return which return was accepted, were correct and there was no justification to take a fresh look at the matter. This reply was given on 26th Jan., 1987. It appears that respondent No. 1 was not satisfied with the reply so given. Accordingly, a notice was issued. Copy of this has been placed on record as Annexure ‘A’. This notice reads as under : “There are certain points in connection with the return of income submitted by you for the asst. yr. 1985-86 in regard to which I should like some further information. You are hereby required to attend my office at 10 A.M. on 5th Feb., 1988 either in person or by a representative duly authorised in writing in this behalf, or there produce or cause there to be produced at the said time any documents, accounts and other evidence on which you may rely in support of the return filed by you. ITO Circle/District.” Accompanying this notice was a detailed information on the basis of which action was sought to be taken. It was pointed out that the action is sought to be taken in terms of s. 143(2)(b) of the Act. This led the petitioner to approach this Court. The learned counsel for the petitioner submits that the officer who has issued the notice has no jurisdiction to issue the same. Primary reliance is being placed on what is stated in para. 5(a) and (b) of the writ petition. It is submitted that once an assessment has been completed in terms of s. 143(1) of the Act and when this assessment is made after due scrutiny, it cannot be reopened in terms of s. 143(2)(b). The assessing authority cannot start the proceeding afresh. It is stated that only when the original assessment made is incorrect, inadequate or incomplete in material respect, i.e., the total amount of income assessed under that section is lower than the amount of total income on which the petitioner is liable to pay the tax, only then, resort can be had to s. 143(2) (b). It is further stated that as another course is also available to the IT authorities, (this is under ss. 147, 148 and 263 of the Act), these provisions having been not adopted and the respondent authorities having relied on a provision which was not available to them on account of bar of limitation, they have resorted to provisions of s. 143(2)(b). This, according to the learned counsel, is a method which is not available to the respondent authorities. The other argument which has been put across is that the information which has been gathered by the respondents when letter dt. 15th Jan., 1987 was issued, the facts and figures are with regard to the period from 1st Feb., 1972 to 31st Jan., 1985. It is urged that the respondent authorities cannot look into this material because the finality stands attached to the assessments which are beyond a period of eight years. If that material is taken into consideration, then the scrutiny would be for periods beyond the period of limitation.

This as per the petitioner cannot be done. Another argument which has been raised is that the assessment proceedings could be opened with regard to that period which is within limitation prescribed in this behalf. This is eight years in case there is failure on the part of the assessee to disclose the income and in case there is some remissness on the part of the Department, then the assessment can be opened for a period beyond the four years. This is so provided in s. 148. It is on the above premises that a challenge is made to the jurisdiction of the assessing authority to proceed with the matter. After having heard the learned counsel for the parties I am of the opinion that a notice which has been issued and which is the subject-matter of challenge in this petition appears to have been issued without due application of mind. The assessment year is 1985-86. Some amount which is said to be not accounted for and regarding which there is suppression is to the tune of Rs. 66,84,993.95 ps. This suppression is for a period beginning from 1st Feb., 1972 to 31st Jan., 1985. As to how for a period of 13 years the assessee can be asked to explain qua single asst. yr. 198586 is not apparent. The authority issuing the notice should have been specific vis-a-vis an amount which was suppressed in the asst. yr. 1985-86. It is only qua that amount the assessee can be called upon to explain. The clubbing together of an amount w.e.f. 1st Feb., 1972, to 31st Jan., 1985, and creating liability in one year would not be in accordance with law. As the respondent No. 1 has not applied his mind to the above aspect and has included material which is extraneous, thus the notice is liable to be quashed. This petition is allowed leaving the respondents to take such steps as they may deem proper. Proceedings would not be taken in pursuance of the notice noticed above.

[Citation : 248 ITR 196]

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