Bal Ram Jakhar vs Commissioner of Income Tax and Others

G.S. Singhvi, J.—This is a petition for quashing of the notice dated March 27, 1999 (annexure P-3), issued by the Assistant Commissioner of Income Tax, Circle-cum-New Assessees Circle, Bhatinda, u/s 148 of the Income Tax Act, 1961 (for short "the 1961 Act"), vide which the petitioner has been asked to furnish a return in the prescribed form in respect of the assessment year 1988-89. The petitioner has also prayed for quashing of the letter dated January 28, 2000 (annexure P-10), sent by the Deputy Commissioner of Income Tax, Circle-cum-New Assessees Circle, Bhatinda, requiring him to attend the proceedings initiated u/s 143(2) of the 1961 Act.

The facts which have a bearing on the decision of the issue raised by the petitioner are that he had filed a return of income for the assessment year 1988-89 declaring an income of Rs. 41,950 and agricultural land income for rate purposes at Rs. 2,11.822. The Income Tax Officer, Ward-I, Abohar, accepted the return u/s 143(1) of the 1961 Act. By the impugned notice issued u/s 148 of the 1961 Act, the Assistant Commissioner of Income Tax has called upon the petitioner to furnish a return for recomputation of income for the assessment year 1988-89. The reasons, which constitute the foundation of the action initiated by the concerned authority, were conveyed to the petitioner, vide annexure P-5, the relevant extract of which reads as under :

"As per information received from DIT (Inv.), New Delhi, received through the Chief Commissioner of Income Tax, Chandigarh, vide No. CC/ CHD/TECH of 1998-99/Interim Enquiry/7568, dated March 23, 1999, that the assessee alleged to be one of the recipient of monies from Jain brothers of S. K. Jain hawala scam. Shri Balram Jakhar is one of the persons against whom the charge-sheet was filed on January 23, 1996, by the CBI under the Prevention of Corruption Act. It is alleged that the assessee has received a sum of Rs 17,00,000 during the financial year 1987-88 relevant to the assessment year 1988-89, from Jain brothers. This amount received from Jain brothers to the tune of Rs. 17,00,000 has escaped assessment which tantamounts to concealment of income. Thus, the case requires deep investigation. Hence, permission to issue notice u/s 148 of the. Income Tax Act, for the assessment year 1988-89 may kindly be granted."

On receipt of the impugned notice, the petitioner''s representative sent a letter, annexure P-6, dated June 22, 1999, to the Assistant Commissioner of Income Tax, Circle-cum-New Assessees Circle, Bhatinda, to supply the certified copy of the return and the statement of income filed by his client for the assessment year 1988-89 by stating that his Income Tax file was not traceable. Vide letter, annexure P-7, dated August 2, 1999, the Deputy Commissioner of Income Tax, Circle-cum-New Assessees Circle, Bhatinda, informed the petitioner that the assessment record in relation to the year 1988-89 is not readily available in his office. However, the petitioner''s representative reiterated his request, vide letter, annexure P-8, dated August 3, 1999. After about four months, he sent a letter, annexure P-9, dated December 17, 1999, against the non-supply of copies of various documents including Jain diaries along with the notice and requested that the copies of documents, statements and copies of the Jain diaries showing the receipt of money by the petitioner may be supplied. This was declined by the Deputy Commissioner of Income Tax, vide his letter dated January 28, 2000 (annexure P-10). After this, the petitioner''s advocate submitted a representation in the form of reply to the letter dated January 28, 2000, asserting therein that no action can be taken against his client in pursuance of the notice, annexure P-3, because the Special Judge, Delhi, had refused to frame charges on the complaint made by the Central Bureau of Investigation, the reason on which notice u/s 148 of the Act was issued had become non-existent.

Shri A. K. Mittal argued that even though no order has been passed by the competent authority of the Income Tax Department creating additional demand against the petitioner, the court should intervene at this stage and quash the notice in view of the order passed by the Special Judge, Delhi, and the statement made by counsel for the Central Bureau of Investigation in Revision Petition No. 413 of 1997--CBI v. Balram Jakhar that his client does not have corroborative evidence against the petitioner in respect of the payment of Rs. 51,24,800. Learned counsel relied on the observations made by this court in Commissioner of Income Tax Vs. Atlas Cycle Industries, and submitted that the impugned notice should be quashed because continuation of the proceedings on the basis of the report of the Central Bureau of Investigation would cause unnecessary harassment to the petitioner. Shri Mittal then argued that the reasons recorded by the concerned authority do not satisfy the condition enumerated in Section 148 of the 1961 Act and, therefore, the notice should be quashed. In support of this argument, learned counsel relied on R. S. CHIRANJI LAL and SONS Vs. COMMISSIONER OF Income Tax, DELHI, AJMER, RAJASTHAN, AND MADHYA BHARAT., .

We have thoughtfully considered the arguments/submissions of learned counsel, but have not felt persuaded to agree with him that the jurisdiction of this court under article 226 should be exercised for quashing of the impugned notice and, in our opinion, the writ petition deserves to be dismissed as premature. It is not the petitioner''s case that he has filed a return in pursuance of the impugned notice and any order prejudicially affecting his rights or interest has been passed by the concerned authority. In view of this, we do not find any justification to entertain the petitioner''s prayer for quashing of the notice issued u/s 148 of the Act.

In view of this conclusion, we would have refrained from expressing any opinion on the merits of the reasons recorded by the Assistant Commissioner of Income Tax, Circle-cum-New Assessees Circle, Bhatinda, for initiating proceedings u/s 147 read with Section 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 an 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 petitioner''s liability to pay tax in relation to the particular assessment year simply because in the criminal case charge has not been framed.

We are further of the view that the opinion formed by the Assistant Commissioner cannot be per se 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 u/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 reabpreciation of the matter, forms a different opinion.

In M/s. Phool Chand Bajrang Lal and another Vs. Income Tax Officer and another, after reviewing a number of judicial precedents on the ambit and scope of Sections 147 and 148 of the 1961 Act, a two-judge Bench of the Supreme Court held as under (page 477) :

"From a combined review of the judgments of this court, it follows that an Income Tax Officer acquires jurisdiction to reopen an assessment u/s 147(a) read with Section 148 of the Income Tax 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 man 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 of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the. Income Tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but if is open to an assessee to establish that there in fact existed no belief or 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 Income Tax Officer and examine whether there was any material available OH the record from which the requisite belief could be formed by the Income Tax Officer 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 Income Tax Officer, 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 Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 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 Section 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 ''you accepted my lie, now your hands are tied and you can do nothing. It would be a travesty of justice to allow the assessee that latitude."

In Raymond Woollen Mills Ltd. Vs. Income Tax Officer and Others, , 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.

On the basis of the above discussion, we hold that the petitioner has failed to make out a case for quashing of the notice, annexure P-3, and the letter, annexure P-10.

Hence, the writ petition is dismissed leaving the petitioner free to file a return in pursuance of the impugned notice and raise all legal and factual objections against the initiation of proceedings u/s 148 of the 1961 Act. We also make it clear that the observations made in this order shall not adversely affect the case of the petitioner.