Commissioner of Income Tax vs Manohar Lal Gupta

R.M. Lodha, J.—This is reference application u/s 256(2) of the IT Act, 1961 at the instance of the Revenue.

Manohar Lal Gupta (for short, ''the assessee''), on 9th Oct., 1979 was apprehended by the Customs authorities, Jaipur at Ghat Gate, Jaipur. The search was conducted on his person and the file bag that he was carrying in which emeralds and Ruby (finished goods) of about Rs. 3,48,116 were recovered. For want of any proof by him for lawful acquisition/possession of the said goods, the Customs authorities seized the said goods somewhere in the third week of October, 1979. The seized goods were delivered to the authorised officer (ITO) u/s 132A(2) of the IT Act, 1961 by the Customs authorities on 29th Dec, 1980. Pertinently, the ITO, H-Ward, Jaipur, on 27th Nov., 1981, passed a provisional order of assessment u/s 132(5) assessing undisclosed income of the assessee at Rs. 3,48,116 and raising total tax liability at Rs. 3,49,509. On 31st May, 1982, the assessee filed a return of income for the asst. yr. 1980-81 showing total income of Rs. 9,610. The concerned ITO passed an order on 15th June, 1982 u/s 143(1) accepting the returned income. However, on 16th Nov., 1983, the ITO, H-Ward issued a notice u/s 147/148 to the assessee for escapement of his income. The assessee responded to the notice and raised various objections. The AO by his order dt. 14th Feb., 1986 assessed the appellant''s income at Rs. 1,90,090 (this included income from undisclosed source amounting to Rs. 1,73,992 being value of precious and semi-precious stones based on the value by the Appraiser, Foreign Post Office, Jaipur of the seized goods by the Customs authorities).

The assessee challenged the order of the ITO, H-Ward, Jaipur passed on 14th Feb., 1986 by filing an appeal before the CIT(A), Rajasthan-II, Jaipur.

The CIT(A) allowed the appeal by his order dt. 23rd March, 1988 and set aside the order of AO holding that the reopening of the assessment u/s 147 of the IT Act was bad in law as primary and basic facts were within the knowledge of the AO.

The Revenue approached the Tribunal by filing appeal against the order of the CIT(A). The assessee filed cross-objections therein. The Tribunal after hearing the parties by its order dt. 27th March 1992 affirmed the order of the CIT(A) and dismissed the appeal of the Revenue and the cross-objections of the assessee.

The Revenue made an application before the Tribunal u/s 256(1) for making reference of the following question of law to the Rajasthan High Court for its answer:

Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the CIT(A)''s order quashing the, reassessment made u/s 147/148 of the IT Act, 1961?.

The Tribunal by its order dt. 14th July, 1993 dismissed the said application. It is in these circumstances that the Revenue has made this application u/s 256(2) for asking the Tribunal to refer the aforenoticed question to this Court for its opinion.

Mr. Anuroop Singhi, counsel for the Revenue made two-fold submissions : (one) that the order dt. 14th Feb., 1986 passed by the AO u/s 143(1) of the IT Act is only an intimation and not an assessment order and yet the Tribunal observed that without taking action u/s 143(2)(b) of the IT Act the proceedings u/s 147 could not; have been initiated and (two) that the assessee failed to disclose in his return the income, the facts concerning seized goods (emerald and ruby having value of Rs. 3,48,116) and, therefore, the AO did not commit any error or illegality in issuing the notice for reopening the case. He would submit that the notice issued to the assessee for reopening the assessment for the asst. yr. 1980-81 was within time. He, thus, submitted that the question of law arises from the facts of the present case as to whether the Tribunal was justified in upholding the order of CIT(A) quashing the reassessment made u/s 143(3)/148 of the IT Act, 1961 for the asst. yr. 1980-81?

Mr. J.K. Ranka, advocate for the assessee supported the order of the Tribunal and submitted that the matter stands concluded on facts and it does not give rise to any question of law.

Though in support of his first contention, that the order dt. 15th June, 1982 passed by the AO u/s 143(1) was only an intimation, the counsel for the Revenue relied upon the judgment of the Supreme Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., yet we find that the observations of the Supreme Court that the acceptance of return u/s 143(1) is an intimation and not the assessment order are referable to the amended provisions of Section 143(1) post 1st April, 1989. Insofar as the provisions of Section 143(1) as it stood prior to 1st April, 1989 were concerned, the Supreme Court held thus : "under Section 143(1)(a) as it stood prior to 1st April, 1989, the AO had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent."

Thus, the order dt. 15th June, 1982 accepting return by the AO is an order of assessment. Of course, failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment proceedings when the order has been passed u/s 143(1). In the case in hand, it is not the contention of the assessee that without taking steps u/s 143(3), the AO was powerless to initiate reassessment proceedings having accepted the return u/s 143(1). The assesses opposed the reassessment proceedings principally on the ground that all basic and primary facts were in the know of the AO when he passed the assessment order on 15th June, 1982 and, thus, reassessment proceedings Could not have been initiated on the basis of same material; the action amounts to change of opinion which is not permissible in law. The counsel for the Revenue strenuously urged that it was obligatory on the part of the assessee to disclose the facts concerning the seizure of finished goods (emerald and ruby) which he did not and, therefore, on the basis of the new information concerning the seizure of the goods and the report from the Customs authorities, the reassessment proceedings were initiated. According to him, the AO did not commit any illegality in initiating the reassessment proceedings on the new. information concerning the income of the assessee having come to the notice of the AO. We are unable to accept the submission of the counsel for the Revenue. As noticed above, the goods were seized by the Customs authorities somewhere in the third week of October, 1979 and after valuation of the said goods having been got done by the Customs authorities from the Appraiser, Foreign Post Office, Jaipur, the said goods were delivered to ITO under the provisions of Section 132A(2) of the IT Act, 1961 on 29th Dec., 1980. As a matter of fact, the ITO, H-Ward, Jaipur framed provisional assessment order u/s 132(5) of the IT Act assessing the income of the assessee at Rs. 3,48,116. The assessee filed return of income for the asst. yr. 1980-81 thereafter on 31st May, 1982 and the order u/s 143(1) accepting the return of income was passed on'' 15th June, 1982. The AO, thus, at the time of passing of the order dt. 15th June, 1982 had in his possession all primary facts necessary for framing the assessment and it was for him to draw proper inference from those facts which the ITO did not do. It was, thus, plainly a case of oversight by the AO and not that the income chargeable to tax had escaped assessment by the reason of omission or failure on the part of the assessee to disclose fully and truly all material facts. Our view finds support from the decisions of the Supreme Court in the cases of Gemini Leather Stores Vs. The Income Tax Officer B Ward, Agra and Others, wherein the Supreme Court upon consideration of the decisions in the cases of Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, ; The Commissioner of Income Tax, Calcutta Vs. Burlop Dealers Ltd., ; and Commissioner of Income Tax, West Bengal, and Another Vs. Hemchandra Kar and Others, , held thus:

In the case before us the assessee did not disclose the transactions evidenced by the drafts which the ITO discovered. After this discovery the ITO had in his possession all the primary facts, and it was for him to make necessary enquiries and draw proper inference as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year. This the ITO did not do. It was plainly a case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The ITO had all the material facts before him when he made the original assessment. He cannot now take recourse to Section 147(a) to remedy the error resulting from his own oversight.

The consideration of the matter by the Tribunal is in accord with the law exposited by the Supreme Court in the aforereferred case.

We are, thus, satisfied that the order of Tribunal dt. 27th March, 1992 does not give rise to any question of law and the rejection of the application u/s 256(1) is not flawed.

The Income Tax application is, accordingly, dismissed.