High Court Of Karnataka
Ratnachudamani S. Utnal vs. Income Tax Officer
Sections 147, 148, ART. 226
Asst. Year 1998-99, 1999-2000
N.K. Patil, J.
Writ Petn. Nos. 36665 & 36721 of 2000
25th May, 2004
Counsel Appeared
S.V. Tilgul, for the Petitioner : Indrakumar, for the Respondent
ORDER
N.K. Patil, J. :
The petitioner, questioning the legality and validity of the impugned notices dt. 17th Oct., 2000, vide Annexs. A and B, has presented these writ petitions. The grievance of the petitioner as made out by the learned counsel for the petitioner in these writ petitions is that, the petitioner is an income-tax assessee; he is submitting his IT returns every year and he has submitted his IT returns for the years 1998-1999 and 1999-2000. Be that as it may, to the shock and surprise to the petitioner, he had received two notices dt. 17th Oct., 2000, from the ITO, Ward No. 1 Bijapur, under s. 148 of the IT Act, 1961, alleging that income of the petitioner in respect of the aforesaid two assessment years has escaped assessments within the meaning of s. 147 of the IT Act, and also calling upon him to submit additional return in the prescribed form in respect of his income for the aforesaid two assessment years. The said impugned notices are alleged to have been issued in the proceedings initiated under ss. 148 and 147 of the IT Act, 1961. Assailing the correctness of the said notices, the petitioner has presented these writ petitions.
The principal submission canvassed by the learned senior counsel appearing for the petitioner is that, the impugned notices issued by the respondent are illegal and arbitrary and they are not in consonance with the mandatory provision of s. 148 of the IT Act. Further, he submitted that, in the impugned notices, the respondent has not assigned any reasons for reopening the case for the asst. yrs. 1998-1999 and 1999-2000. To substantiate his submission, he placed reliance on the judgment of Madhya Pradesh High Court in the case of Arjun Singh & Anr. vs. Asstt. Director of IT (Inv.) & Ors. (2000) 159 CTR (MP) 53 : (2000) 246 ITR 363 (MP) and also on the judgment of Gujarat High Court in the case Birla VXL Ltd. vs. Asstt. CIT (1996) 130 CTR (Guj) 281 : (1996) 217 ITR 1 (Guj) and submitted that, “the mandatory requirement which is necessary for assuming jurisdiction is that the AO shall record his reasons for issuing notice. In a case where the notice was issued, the reasons must be recorded and disclosed to the assessee to give reply to the impugned notice issued by the IT authorities”. No reason as such has been assigned in the impugned notices and the notices have been issued in the printed proforma under s. 148 of the IT Act. Therefore, he submitted that the proceedings initiated and the notices issued by the respondent is one without authority of law and as such, they are liable to be set aside. Per contra, the learned senior standing counsel appearing for the respondent, inter alia, contended and substantiated the impugned notices issued by the respondent. He submitted that the said notices have been issued in strict compliance of mandatory provisions of the IT Act. No error or illegality as such has been committed by the respondent in issuing the same.
Further he has submitted that, the petitioner is not entitled to seek any reliefs at the hands of this Court by invoking extraordinary jurisdiction under Art. 226 of the Constitution of India, in view of the well-settled law laid down by the apex Court in the case of Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC). Further he placed reliance on the judgment of Kerala High Court in the case of Dr. V. Mohan Das vs. Dy. CIT & Anr. (1991) 188 ITR 727 (Ker) and submitted that it is very much clear from the law laid down in the above cases that, the petitioner is not entitled to seek any reliefs at the hands of this Court. Further he placed reliance on the proceedings initiated and recorded by the competent authority. To substantiate his submission, he placed the original records before this Court and submitted that at page No. 1 of the original record, the proceedings has been specifically recorded on 17th Oct., 2000. Therefore, the learned counsel appearing for the respondent submitted that the writ petitions filed by the petitioner are liable to be dismissed in limine by imposing exemplary costs for not disclosing his capital gain arrived from selling the plots, as the petitioner himself has appeared before the assessing authority on 16th Aug., 2000 and gave his statement on oath admitting that he has sold 56 plots between 1986 to 1996. The learned counsel for the respondent submitted that the unequivocal admission made by the petitioner before the authority on 16th Aug., 2000, has been intentionally and deliberately suppressed by him in these writ petitions and on the ground of suppression of material facts also, the writ petitions are liable to be dismissed with costs.
I have heard the learned senior counsel appearing for the petitioner and the learned senior standing counsel for respondent. After thorough evaluation of the entire materials available on record and the contentions urged by both the counsel and on careful perusal of the impugned notices issued by the respondent vide Annexs. A and B, it is manifest on the face of the record that, the respondent has not committed any error or illegality while issuing the impugned notices and the same were issued in strict compliance of s. 148 of the IT Act. Further, it is significant to note here itself that, the petitioner himself has appeared before the assessing authority on 16th Aug., 2000 and stated that : “I have converted the lands into NA and paid Rs. 1,21,410 as development charges and Rs. 2,00,000 as cost of land. The cost of land was paid to above two persons in 1987. I sold so far 56 plots from 1984 to 1996”. But, this aspect of the matter has not at ail whispered by the petitioner in the present writ petitions. The petitioner has intentionally and deliberately suppressed the material facts. If the petitioner wants any relief at the hands of this Court, he has to approach the Court with clean hands and it is duty cast on the petitioner to state the true facts and make out a case, as rightly pointed out by the learned senior standing counsel for the respondent. Therefore, the writ petitions are liable to be dismissed on the ground of suppression of material facts. Further, as rightly pointed out by the learned counsel for the respondent, as a matter of fact, the respondent has recorded the reasons on 17th Oct., 2000, for issuing the impugned notices and it was very much available in the original record at page No. 1 which reads as follows: “While recording the statement on oath, it is found that the assessee is assessed to tax towards the income from salary and has filed the return of income regularly. Further, it is found that the assessee has not declared any income from the profit on sale of plots. In view of this, on the basis of information furnished, it is found that the assessee’s income for the asst. yrs. 1998-1999 and 1999-2000 escaped assessment. Notice under s. 148 for the above said assessment years are issued.” Accordingly, notice under ss. 142(1) and 143(2) for the asst. yrs. 1998-1999 and 1999-2000.
8. Further, in view of the well settled law laid down by the apex Court in the case of Raymond Woollen Mills Ltd. vs. ITO & Ors. (supra), which reads as follows : “In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the Court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the ITO after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all points before the assessing authority.” In the case of Dr. V. Mohan Das vs. Dy. CIT & Ors. (supra), which reads as follows : “In reply, counsel for the Revenue submitted that the 1st respondent was not required to state reasons while issuing Exhibits P12 and P13. Existence of reason to believe that there was escapement of income is all that is needed to invoke the power under s. 148, submits counsel. He relies on the decision in S. Narayanappa & Ors. vs. CIT (1967) 63 ITR 219 (SC) to derive support for his submission. The Court observed (at p. 222): ‘The earlier stage of the proceeding for recording the reasons of the
ITO and for obtaining the sanction of the CIT are administrative in character and are not quasi-judicial. The scheme of s. 34 of the Act is that, if the conditions of the main section are satisfied, a notice has to be issued to the assessee containing all or any of the requirements… There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings the reasons which induced the CIT to accord sanction to proceed under s. 34 must also be communicated to the assessee’. (emphasis, italicized in print, supplied)
To the same effect is the decision in Sowdagar Ahmed Khan vs. ITO (1968) 70 ITR 79 (SC). The Supreme Court found that initiation of proceedings under s. 34(1)(a) (1922 Act) would be valid, if material is available to form “the prima facie belief that the assessee had omitted to disclose fully and truly all material facts.” Sec. 148 requires the ITO to record his reason for issuing a notice for reopening an assessment. He is also required to serve a notice on the assessee in the manner contemplated by s. 139(2). Under s. 139(2), the ITO must “issue and serve” a notice on the assessee to furnish a return of income. The section does not envision the need to disclose reasons for the belief, nor can it be read into it as a requirement of natural justice. No adjudication of rights or determination resulting in consequences to the assessee is involved at the stage of issuing the notice. The only requirement in law for initiating proceedings under s. 148 is that there must be reasons to justify the belief that there is escapement or suppression of income. The requirement is only so far and no further, and the requirements of quasi-judicial determination do not govern the proceedings at the stage of issuing a notice. Because no reasons are stated, it does not mean that there are no reasons. In the instant case, the files disclose that there are grounds for reasonable belief to initiate proceedings. Whether the reasons are sufficient to make an assessment or not is a matter to be considered at a later stage after considering the case of the assessee and other relevant factors”. In view of the above settled law, I am of the considered view that, neither the petitioner has made out any prima facie case to interfere in the impugned notices issued by the respondent nor he has made out any case to exercise the extraordinary jurisdiction under Art. 226 of the Constitution of India.
In the instant case, the competent authority has recorded its finding for initiating the proceedings as envisaged under s. 148 of the IT Act. Because no reasons are stated as contended by the learned counsel for the petitioner, it does not mean that there are no reasons. The original file made available by the learned counsel for the respondent discloses that there are good grounds for reasonable belief to initiate proceedings. Whether the reasons are sufficient to make an assessment or not is a matter to be considered at a later stage, after considering the case of the assessee and other relevant factors. The only requirement is, two distinct conditions must be satisfied before the ITO can assume jurisdiction to issue notice under s. 147(a). First, he must have reason to believe that the income of the assessee has escaped assessment and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is fulfilled, the competent authority, i.e., the ITO has got the jurisdiction to issue notice. The original records made available by the learned counsel for the respondent prove beyond reasonable doubt that there is a prima facie proof to issue notice. The decision is subject to deciding the same on merits in accordance with law, as envisaged under the mandatory provisions of the IT Act. Therefore, I do not find any error or illegality, as such, committed by the ITO in issuing the notices to the petitioner. In my considered view, the interference by this Court at this stage is uncalled for.
There is no dispute regarding the well-settled law laid down by the High Courts in the cases relied upon by the learned counsel for the petitioner to substantiate his case, as referred to above. But, the facts and circumstances of those cases are entirely different from the facts and circumstances of the present case. As a matter of fact, as stated supra, the competent authority has recorded the reasons for initiating the proceedings after taking into consideration the sworn statement given by the petitioner before the competent authority on 16th Aug., 2000. Therefore, the reliance placed by the learned counsel for the petitioner on the above judgments has no bearing on the facts and circumstances of the present case. Yet another reason, the writ petitions filed by the petitioner are liable to be dismissed is on the ground of suppression of material facts. The petitioner knowing fully well, intentionally and deliberately has not whispered anything about the statement made by him on oath before the competent authority on 16th Aug., 2000, in these writ petitions. The petitioner himself has appeared before the competent authority and stated on oath that, he has sold 56 plots from 1984 to 1996 after forming layout. But, he has come up before this Court taking a specific ground that the proceedings initiated and the notices issued by the respondent without assigning any reasons were one without jurisdiction. The said submission and the specific ground taken by the petitioner in these petitions are contrary to the materials on record. Therefore, on the ground of suppression of material facts also, the writ petitions are liable to be dismissed with costs. For the foregoing reasons, the writ petitions are dismissed with costs of Rs. 2,000 to be payable by the petitioner to the respondent within three weeks from the date of receipt of the copy of this order. However, the dismissal of these writ petitions will not come in the way of the petitioner to redress his grievance before the competent authority as permissible under the IT Act, if so advised.
[Citation : 269 ITR 272]
