High Court Of Madhya Pradesh : Indore Bench
Keshrimal (Deceased) Through Lrs & Ors. vs. Income Tax Officer
Sections 147(a)
Asst. Year 1983-84, 1985-86
A.M. Sapre, J.
MP No. 1897 of 1986 & WP No. 1019 of 1987
19th February, 2003
Counsel Appeared
P.M. Choudhery, for the Petitioner : A.P. Patankar, for the Respondent
ORDER
A.M. SAPRE, J. :
The decision rendered in this writ shall also govern disposal of other writ being WP No. 1019/1987 (renumbered as WP 3638/1997) as both these writs involve identical issues and relates to same petitioner except the difference being the present petition arise out of IT Act and the other one arise out of WT Act.
2. By filing this writ under Art. 226/227 of Constitution of India, the petitioner seeks to challenge the notices issued under s. 147(a) of the IT Act (for short hereinafter referred to as ‘Act’), dt. 17th Nov., 1986, for the asst. yrs. 1983-84, 1984-85, and 1985-86 (Annexures P/16, P/17 and P/18). The reasoning for seeking to reopen the assessment for the years in question and which is communicated to the petitioner along with impugned notices reads as under : HINDI MATTER
The petitioner is an assessee as defined under s. 2(7) of the Act. It is an HUF which is being assessed in that capacity by and under the name M/s Kesrimal Bapulal through its Karta Keshrimal at all relevant time. During pendency of this writ, Keshrimal i.e., Karta of said HUF expired and hence present petitioners who are his legal representatives and also coparceners of HUF are brought on record to continue the proceedings. The petitioner-an assessee is engaged in the business and derives income from property as also from money-lending and interest.
For the asst. yr. 1980-81, the Assessing Officer (AO) made assessment of the petitioner under s. 143(3) of the Act. In this assessment, the petitioner had set up one document styled as family agreement settlement, dt. 21st Oct., 1979, (Annexure P/3). By this family agreement, the petitioner claimed that a sum of Rs. 1,25,112 has gone out of the hands of HUF and hence cannot now be taxed as an income of HUF. In other words, the contention of petitioner on the basis of the said family settlement was that on and after 21st Oct., 1979, (the date of family settlement), the amount of Rs. 1,25,112 will no longer be available for being taxed as HUF property and hence it be not accordingly treated as an income/assets of the HUF. It is this issue which was gone into by the AO in the assessment proceedings initiated under s. 143(3) ibid for the year 1980-81 and by his order, dt. 25th Oct., 1982 (Annexure P/2) the (AO) accepted the claim of the petitioner and accordingly granted benefit of the said sum i.e., Rs. 1,25,112 to the petitioner for the year 198081. However, the Commissioner of Income-tax (CIT) then invoked the powers conferred under s. 263 of the Act and questioned the correctness of the finding recorded by the AO in his order, dt. 25th Oct., 1982, when he granted benefit to petitioner of Rs. 1,25,112 on the basis of alleged family settlement. In the opinion of CIT the order of ITO was prejudicial to the interest of Revenue inasmuch as it wrongly relied upon the alleged family settlement for giving benefit to the petitioner to the extent of Rs. 1,25,112. The petitioner was thus afforded an opportunity of hearing in the suo motu exercise of powers by the CIT under s. 263 ibid and eventually by order dt. 5th Oct., 1984, (Annexure P/9), the CIT set aside the order of ITO insofar as it related to grant of benefit to petitioner of an amount of Rs. 1,25,112 on the basis of family settlement. It is stated that the order of CIT still holds the field.
Then came the assessment years in question i.e., 1983-84, 1984-85 and 1985-86. The petitioner submitted their return for these three years. However, the AO passed an assessment order under s. 143(1) of the Act on 13th July, 1985, (Annexure P/13) and P/14 for the year 1983-84 and 1984-85 and on 21st Jan., 1986, (Annexure P/15), for the year 1985-86. It may be noted that since the assessment orders for all the three years had been passed under s. 143(1) of the Act and not under s. 143(3) ibid the return submitted by the petitioner were accepted as it is and no demand of tax as such was issued nor any inquiry held.
On 27th Nov., 1986, the AO issued the impugned notices of reassessment of the aforesaid three years cases (Annexures p. 10, 17, 18) asking the petitioner to submit the detail of income of Rs. 1,25,122 and also details of income earned out of it. The petitioner was also asked to explain as to where they have invested the said income and the manner in which it was utilised for the years in question. As observed supra, it is against these notices of reassessment for the three years in question, the petitioner has felt aggrieved and filed this writ. Notice of the petition was issued to respondents. They are served and represented. Heard Shri P.M. Choudhery, L/o for the petitioner and Shri A.P.Patankar, L/o for the Respondent. Having heard the L/o for the parties and having perused the record of the case, I find no merit in the writ. In my considered opinion, the impugned notices issued under s. 147(a) of the Act for making reassessment of the 3 years in question were rightly issued and hence has to be given effect to. Firstly, it is clear that the assessment for these years had been made under s. 143(1) of the Act. In other words, since the AO had made assessment of these three years under s. 143(1) of the Act and hence no enquiry into any of the matters including that of investment in relation to disputed amount of Rs. 1,25,112 could be undertaken by the AO in these three years. This could only be done either by issuing notice to the petitioner under s. 143(2) ibid or by issuing a notice of reassessment under s. 147(a) of the Act. There is an authority for this proposition which empowers the AO to issue notice of reassessment under s. 147(a) of the Act in, respect of assessment made under s. 143(1) of the Act. In A. Pusa Lal vs. CIT (1987) 65 CTR (AP) 151 : (1988) 169 ITR 215 (AP) [reference is made in Chaturvedi and Pithisaria, 4th Edition, p. 3554 volume] their Lordships while dealing with this issue held as under : “The power that can be exercised under s. 143(2) of the Act to correct the assessment made under s. 143(1) does not exclude the AO’s power to reopen the assessment under s. 147. If the ingredients of s. 147 are satisfied, it is open to the AO to exercise that power notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under s. 147 is vitiated because the AO failed to invoke his powers to correct assessment already completed under s. 143(1) by issuing a notice under s. 143(2) of the Act.”
10. The only thing which is required to be seen while issuing notice under s. 147(a) of the Act is whether requirement of s. 147(a) of the Act are satisfied in the facts of the case or not ? The submission of L/o for the petitioner was that none of the conditions necessary fur invoking s. 147 (a) ibid are satisfied in this case and hence no notice much less notice under s. 147(a) could have been issued. L/o contended that it was not a case of escaped assessment because the assessee had already disclosed the family settlement in the year 1980-81 and the same having been dealt with by AO in its order, referred supra, no more reference of that document was needed. I do not agree to this submission.
It is not a case where by impugned notice, the petitioner is called upon to disclose the document (family settlement). It is, however, a case where a document disclosed by the petitioner in the year 1980-81 for taking certain benefit to the extent of Rs. 1,25,112 and which was not allowed to be taken by the CIT—it being found to be prejudicial to the interest of the Revenue, the petitioner is now called upon to disclose as to its details of investment and use of Rs. 1,25,112 for the subsequent years. Indeed, once the amount of Rs. 1,25,112 is held to be petitioner’s income and they are not allowed to take benefit of so-called family settlement then the same is required to be explained in subsequent years as to how, where and in what manner, it was utilised and accounted for by the petitioner in their accounts. As observed supra since admittedly the assessment for the three years in question i.e., 1983-84 to 1985-86 were made under s. 143(1) of the Act and not under s. 143(3) ibid, the AO had every right to ask the petitioner to explain the details of the said amount so as to properly give effect to it in the respective years. In other words, once the said sum is held to be petitioner’s income and was not allowed to go out of their fold (though claimed on the strength of alleged family partition), it comes within the net of taxation in the hands of petitioner for being taxed in subsequent years. It is then necessary for the petitioner to explain its details to the satisfaction of AO for being taxed in accordance with the provisions of Act. In such circumstances, the enquiry has got to be made by AO. It then certainly becomes a case of escaped assessment for the years in question so as to invoke the provisions of s. 147(a) ibid. The position would have been different if for the three years in question, the AO had made regular assessment as contemplated under s. 143(3) of the Act and had dealt with this issue after granting an opportunity to the petitioner. But admittedly and as taken note of supra the assessment for the three years in question were not made under s. 143(3) ibid but were made under s. 143(1) ibid where no enquiry could be made nor contemplated. L/o for the petitioner had placed reliance on 2001 (29) Tax Cases 581, Calcutta Discount Co. Ltd. vs. ITO & Anr. (1961) 41 ITR 191 (SC) and Smt. Prabha Rajya Lakshmi vs. WTO & Anr. (1983) 37 CTR (MP) 226 : (1983) 144 ITR 180 (MP). I find these cases to be distinguishable on facts involved in this case. The law decided must be applied to the identical facts when facts differ, the case law does not help. Same is the case here.
13. In view of the aforesaid discussion I find no merit in the writ which fails and is dismissed. As a consequence all interim order passed by this Court in this writ are vacated. The AO is directed to complete reassessment proceedings pursuant to impugned notices within a period of three months after affording an opportunity to the petitioner.
[Citation : 264 ITR 119]
