High Court Of Punjab & Haryana
Bhajan Lal vs. CIT & Anr.
Sections 142(1), 143(2), 147, 148
Asst. Year 1994-95
G.S. Singhvi & Nirmal Singh, JJ.
Civil Writ Petn. No. 3242 of 2000
18th December, 2000
H.L. Sibal with Ms. Rita Kohli, for the Petitioner : R.P. Sawhney with Rajesh Bindal, for the Respondents
G. S. SINGHVI, J. :
This is a petition for quashing of the notices annexures P-1 to P-5 issued by the AO (respondent No. 2) to the petitioner under ss. 148, 142(1) and 143(2) of the IT Act, 1961 (for short “the Act”).
Briefly stated, the facts of the case are that in pursuance of the order of assessment passed by the ITO for the asst. yr. 1994-95, the petitioner deposited due tax. After about three years, the AO issued notice annexure P-1 dt. 26th Aug., 1997, under s. 148 of the Act proposing reassessment of the income of the petitioner for the said assessment year on the ground that his income had escaped assessment within the meaning of s. 147 of the Act. In response to the said notice, the petitioner filed the return dt. 7th Oct., 1997. This was followed by notices annexure P-2 dt. 6th Feb., 1998, issued under s. 142(1), annexure P-3 dt. 2nd July, 1998, under s. 143(2), annexure P4A dt. 6th March, 2000, under s. 143(2), annexure P-4B dt. 6th March, 2000, under s. 142(1) and annexure P-5 dt. 6th March, 2000, under s. 142(1)/143(2) of the Act vide which the petitioner was required to appear in person or through an authorised representative and to produce the documents, accounts and any other evidence in support of his return mentioned in the notice annexure P-5 dt. 6th March, 2000. It was pointed out in the said notice that the investigation made by the Central Bureau of Investigation had revealed that the petitioner had made payments of Rs. 3,00,57,000 between 24th July, 1993, and 3rd Aug., 1993, but the same had not been reflected in the income- tax return dt. 7th Oct., 1997. He was, therefore, asked to explain the source from which payment had been made with a stipulation that on his failure to do so it would be treated as undisclosed income and added to the income already disclosed by him.
The petitioner has challenged the notice mainly on the ground that proceedings under s. 147 of the Act cannot be initiated on the basis of the report submitted by the Central Bureau of Investigation and in any case, it is barred by limitation prescribed under s. 153 of the Act. Another ground raised by him is that the proceedings for reassessment cannot be held till the conclusion of the criminal case pending in the Court of the Special Judge, Delhi in which he has been charged under ss. 120B and 173 of the IPC, and ss. 7, 12 13(2) and 13(1)(a) of the Prevention of Corruption Act, 1988.
In the written statement filed on behalf of the respondents, it has been averred that the writ petition should be dismissed as premature as no order adversely affecting the petitioner has so far been passed. According to them, it such order is passed, then the petitioner can avail of the remedy of appeal before the CIT(A) and the Tribunal. The respondents have further averred that the notice under ss. 142(1) and 143(2) were issued to the petitioner on 2nd July, 1998 and 6th March, 2000, but he has failed to furnish any reply or explanation and has also not produced any evidence regarding the source from which the expenditure was made. As regards the petitionerâs plea of the bar of limitation, the respondents have averred that the proceedings initiated against him are not barred by time and the same can be finalised within two years from the end of the financial year in which the notice under s. 148 of the Act was served.
Shri H.L. Sibal, senior counsel for the petitioner, argued that notice under s. 148 should be quashed because no material was available before the AO on the basis of which he could form an opinion that the income of the petitioner had escaped assessment. Learned counsel then referred to the judgment dt. 29th Sept., 2000, of the Special Judge, Delhi, vide which the petitioner was acquitted of the criminal charges and submitted that in view of the findings recorded by the Court of competent jurisdiction, the substratum of the notice issued under s. 148 must be deemed to have disappeared, and, therefore, the proceedings initiated against the petitioner should be quashed. He invited our attention to the observations made by the special Judge in paras. 114, 142 and 205 of the judgment to show that the charge levelled against the petitioner of having bribed seven Members of Parliament has not been proved and submitted that in view of these findings there is no legal jurisdiction to continue the proceedings initiated under s. 147 r/w s. 148 of the Act.
Shri R.P. Sawhney, senior counsel for the respondents, argued that the notice issued by the AO under s. 148 cannot be invalidated only on the ground that the report of the Central Bureau of Investigation was relied upon by him for believing that the petitionerâs income had escaped assessment. Learned counsel submitted that after examining the report of the Central Bureau of Investigation, the AO had unequivocally recorded that he had reason to believe that the assessee had not declared true particulars of his income and expenditure of Rs. 3,00,57,000 and, therefore, it was a case of escaped assessment within the meaning of s. 147 and there is no valid ground for the Courtâs interference at this stage. He produced the file maintained by the Department to show that the AO had recorded independent reasons before issuing notice under s. 148 of the Act. Shri Sawhney referred to paras. 31 and 100 of the judgment of the Special Judge, Delhi, to show that the petitioner was acquitted by giving benefit of doubt and, submitted that the findings recorded by the Special Judge, Delhi, on the issue of giving bribes to seven Members of Parliament for casting their vote in favour of the Government headed by Shri P.V. Narasimha Rao cannot be treated as conclusive on the legitimate source from which the petitioner had collected Rs. 3,00,57,000 and the petitionerâs acquittal of the charges framed under s. 120B r/w s. 173 of the IPC, and the Prevention of Corruption Act, is not sufficient to absolve him of his liability to explain the source of Rs. 3,00,57,000, which had not been disclosed in the return. Learned counsel also relied on the decision of the Supreme Court in Raymond Woollen Mills Ltd. vs. ITO (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC), and argued that at this stage of the proceedings, the Court cannot go into the insufficiency and adequacy of the material relied on by the assessing authority for the purpose of reopening of the assessment.
We have given serious thought to the respective submissions. In our opinion, the question as to whether the petitioner was a party to the alleged offer of bribes made to seven Members of Parliament for casting their vote in support of the then Government has no bearing on his liability to be taxed on the total income for the year 1994-95 and the competent authority constituted under the Act cannot be deprived of its jurisdiction to determine his liability to pay tax on the total income simply because in the criminal case he has been acquitted. The petitionerâs acquital by the Special Judge, Delhi on the charge of having conspired to bribe the Members of Parliament for exercising their vote in favour of the Government of Shri P.V. Narasimha Rao may be relevant to any other similar proceedings pending against him, but the same cannot be made the basis for quashing notices issued under s. 148 or 142(1) or 143(2) of the 1961 Act, requiring him to produce documents, accounts and other evidence to prove the source of Rs. 3,00,57,000 which he is shown to have spent between 24th July, 1993 and 3rd Aug., 1993. We are further of the view that the opinion formed by the AO cannot per se be regarded as arbitrary or capricious so as to justify intervention of this Court at this stage of the proceedings. The jurisdiction of this Court to interfere with the show-cause notice issued under s. 148 of the Act is extremely limited and the belief formed by the competent authority cannot be set at naught simply because this Court, on reappreciation of the matter, forms a different opinion.
8. The ambit and scope of ss. 147 and 148 of the Act was considered by the Supreme Court in Phool Chand Bajrang Lal vs. ITO (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456 (SC) : TC 51R.825. After reviewing several judicial precedents on the subject, a two-Judges Bench of the Supreme Court held as under : “From a combined review of the judgments of this Court, it follows that an ITO acquires jurisdiction to reopen an assessment under s. 147(a) r/w s. 148 of the IT Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing or a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the ITO, the sufficiency of reasons for forming the belief is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief on that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the ITO and examine whether there was any material available on the record from which the requisite belief could be formed by the ITO and further whether that material had any rational connection or a live-link for the formation of the requisite belief. It would be immaterial whether the ITO, at the time of making the original assessment, could or could not have found by further enquiry or investigation, whether the transaction was genuine or not if, on the basis of subsequent information, the ITO arrives at a conclusion, after satisfying the twin conditions prescribed in s. 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment……
One of the purposes of s. 147 appears to us to be to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say âyou accepted my lie, now your hands are tied and you can do nothingâ. It would be a travesty of justice to allow the assessee that latitude.”
9. In Raymond Woollen Mills Ltd. vs. ITO (supra), their Lordships of the Supreme Court rejected the challenge to the notice issued for reassessment by observing that at that stage, the Court can only consider whether there is a prima facie case for reassessment and reopening proceedings cannot be struck down by going into the sufficiency or correctness of the material relied upon by the assessing authority for the purpose of reopening.
10. In C.W.P. No. 10619 of 2000âBal Ram Jakhar vs. CIT decided on 19th Oct., 2000 [reported at (2001) 169 CTR (P&H) 283], this Court has held that notice issued under s. 147 of the 1961 Act cannot be quashed under Art. 226 of the Constitution of India simply because the Central Bureau of Investigation had not pressed the charge of giving bribe against the petitioner. Some of the observations made in that decision, are extracted below : “In view of this conclusion, we would have refrained from expressing any opinion on the merits of the reasons recorded by the Asstt. CIT, Circle-cum-New Assessees Circle, Bhatinda, for initiating proceedings under s. 147 r/w s. 148 of the 1961 Act, but as Shri Mittal made repeated efforts to persuade us to nullify the notice solely on the ground that the Special Judge, Delhi, has not framed charges against the petitioner, we are constrained to observe that and order, like the one passed by the Special Judge, Delhi, not framing the charge cannot be treated as conclusive so far as the proceedings under the 1961 Act are concerned. A careful reading of the order, annexure P-12, passed by the Delhi High Court in Criminal Revision No. 473 of 1997 shows that the Central Bureau of Investigation had not pressed for framing of charges against the petitioner on the issue of receipt of Rs. 51,24,800 because at that stage it did not have sufficient evidence to corroborate the allegations. The question as to whether the petitioner could be held liable for an offence under the Prevention of Corruption Act or any other contemporaneous statute does not, in our opinion, have any bearing on his liability to be taxed under the 1961 Act and the competent authority constituted under that Act cannot be denuded of its jurisdiction to determine the petitionerâs liability to pay tax in relation to the particular assessment year simply because the criminal case charge has not been framed.”
11. In view of the above discussion, we hold that the notices issued to the petitioner cannot be quashed merely because he has been acquitted of the charge framed under ss. 148, 142(1) and 143(2) of the Act.
12. The arguments of Shri Sibal that the findings recorded by the Special Judge on the question of giving bribe should be declared as binding on the respondents deserves to be rejected because the proceedings initiated against the petitioner relate to the non-disclosure of the full particulars, of the income and not to the alleged act of offering bribes to seven Members of Parliament and even though he may have been acquitted of the latter charge the finding recorded by the Special Judge, Delhi, cannot confer immunity upon him from disclosing the source of money.
For the reasons mentioned above, the writ petition is dismissed.
[Citation : 250 ITR 399]