Commissioner of Income-tax Vs. Air Craft Radio Corporation - Court Judgment

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head note: income tax act, 1961 . reassessment--reason to believesecond reassessment order on same set of facts after annullment of first reassessment order--on the basis of some complaints of tax evasion, ao issued notice under section 148 in a vague manner without recording his own satisfaction only on the basis of those complaints. after dissatisfied with assessee's reply the ao made reassessment order on 31-7-1976. the first appellate authority allowed assessee's appeal and set aside (annulled) order of reassessment. the ao once again on set of facts initiated reopening proceedings and completed reassessment order assessing income at same figure which was done by him in his carier order dated 31-7-1976. the first appellate authority once again annulled the reassessment order. the tribunal confirmed the said order. held: rightly so. the ao was having no jurisdiction to reassess the income on same set of facts and figures in his second reassessment order once again after annulment of first reassessment order by the appellate authority. income tax act, 1961 section 147 - sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply communication of a copy of the written order itself, a party who knows about the making of an order cannot ignore the same and allow grass to grow under its feet and do nothing except waiting for a formal communication of the order or to choose a tenuous plea that even though he knew about the order, he was waiting for its formal communication to seek redress against the same in appeal. if a party does not know about the making of the order either actually or constructively it may claim that the period of limitation would start running from the date it acquires knowledge of the making of an order but one cannot understand how a party, who has acquired knowledge of the making an order either directly or constructively can ignore the same and belatedly seek redress just because the authority making the order had made a default in formally communicating the order to him. allowing a party to do so would amount to placing a premium on the lack of diligence of a party, who is remiss in seeking a remedy that was available to it. therefore, knowledge whether actual or construction of the order passed by the state or regional transport authority should result in commencement of the period of limitation. thus,. in cases where the state or regional transport authority has not communicated the order of refusal passed to the persons concerned, the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order. - uoi [1978]114itr884(all) .however, the assessing officer rejected the submission made by the assessee by observing that when the earlier notice under section 148 of the act was issued and the income-tax officer has sufficient material on record to be satisfied that income had escaped assessment because earlier it could not be recorded properly on the order sheet. in our opinion, the case is, therefore, directly covered by the judgment of the allahabad high court in which the hon'ble court has relied upon the judgment of the supreme court in the case of rao thakur narayan singh [1965]56itr234(sc) .the reassessment proceedings are bad and as such were rightly annulled by the appellate assistant commissioner. the said finding necessarily implies that the income-tax officer had no reason to believe that because of the assessee's failure to disclose the facts income has escaped assessment.m.m. kumar, j.1. the following substantive question of law for the opinion of this court has been referred:whether, on the facts and in the circumstances of the case, the learned income-tax appellate tribunal was right in law in annulling the order of the income-tax officer under section 143(3) read with section 147(a) of the income-tax act, 1961 ?2. the facts may briefly be noticed.3. the assessee is a registered firm. it carries on the business of sale, purchase and repair of radios. on september 21, 1970, original assessment was made at rs. 8,010 by the income-tax officer under section 143(1) of the income-tax act, 1961 (for brevity 'the act') on the basis of the return of income filed by the assessee on august 23, 1969, declaring its income to be rs. 7,959. the assessing officer completed the assessment by issuing notice under section 148 of the act to the assessee on june 2, 1973. the reasons recorded before issue of notice under section 148 of the act were:issue notice under section 148 of the act for the assessment year 1969-70 as i have reasons to believe that the income has been under assessed for this year.(sd.)....income-tax officer4. the assessee replied to the notice by sticking to the income declared in the return filed by him at rs. 7,959. the assessing officer vide order dated july 31, 1976, reassessed the income of the assessee at rs. 73,530. the basis for reopening the assessment appears to be that some complaints about tax evasion were filed against the assessee. however, notice under section 148 of the act forming the belief by the assessing officer, was issued without verification of the allegations levelled in the complaint. in fact on receipt of the complaint a survey under section 133a of the act was made by the inspector of income-tax on june 2, 1973, when the books of account of the assessee for the year 1973-74 were impounded. the books of account pertaining to the assessment year were not available at the shop of the assessee during the course of survey. however, he produced the account books pertaining to earlier years on june 4, 1973, including the books for the financial year 1969-70 under appeal before the assessing officer. the books were impounded and examined and thereafter reassessment order was passed on june 31, 1976, by computing the income at rs. 73,530.5. the assessee challenged the order passed by the assessing officer under section 143(3)/148 of the act by filing an appeal before the commissioner of income-tax. on february 20, 1978, the commissioner accepted the appeal of the assessee on the ground that no reasons were recorded for issuance of notice under section 148 of the act. the order of the appellate commissioner as reproduced by the tribunal reads as under:i have gone through the assessment records. the reasons recorded before issue of notice under section 148 are as under:june 2, 1973issue notice under section 148 for the assessment year 1969-70 as i have reasons to believe that the income has been underassessed for this year.(sd.)....income-tax officer6. it appears that there were some certain complaints against the assessee about tax evasion and the income-tax officer issued notice under section 148 of the act resting his belief on the complaints. no verification of the facts in the complaints was however, made. the appellate assistant commissioner in his order dated february 20, 1978, observed as under:on receipt of the complaint a survey under section 133a was made by the inspector of income-tax on june 2, 1973, books of accounts for 1973-74 were impounded. the books of account for earlier years were not available at the shop during the course of survey under section 133a made on june 2, 1973. the assessee was, therefore, asked to produce the account books for earlier years on june 4, 1973. the books of account for earlier years including the books for the financial year 1968-69 relevant to the assessment year 1969-70 under appeal were produced before the income-tax officer on june 4, 1973, which were then impounded and examined. it has, therefore, been urged that the reasonable belief, if any, that could be formed by the income-tax officer could be after june 4, 1973, after verifying the position from the account books issued. it has, therefore, been urged that the notice issued was based merely on suspection. from the reasons recorded by the income-tax officer as reproduced above it is also clear that he has not discussed the material on the basis of which he formed the belief that the income had escaped assessment. 'in this view of the matter, i am of the opinion that the income-tax officer had no jurisdiction to issue notice under section 148 unless he had bona fide belief on the basis of definite information that income had escaped assessment. in the circumstances, the entire proceedings are vitiated. i am, therefore, unable to sustain the order passed by the income-tax officer. the issue of notice under section 148 and subsequent passing of the order under section 143(3)/147 are therefore annulled.7. after serving notice and filing of reply it was submitted on behalf of the assessee that notice under section 148 of the act could not be issued as it had already been annulled by the appellate assistant commissioner, patiala range, patiala. in support of his submission, reliance was placed on a division bench judgment of the allahabad high court in the case of manoo lal kedarnath v. uoi : [1978]114itr884(all) . however, the assessing officer rejected the submission made by the assessee by observing that when the earlier notice under section 148 of the act was issued and the income-tax officer has sufficient material on record to be satisfied that income had escaped assessment because earlier it could not be recorded properly on the order sheet. he again computed the income of the assessee at rs. 73,530 as was done vide order dated july 31, 1976, which was annulled on february 20, 1978, by the appellate assistant commissioner. it has been recorded as a finding of fact that item of income and deduction for the two years dated july 31, 1976, and december 26, 1978, were exactly the same. again the assessee challenged the order of reassessment framed by the assessing officer before the appellate assistant commissioner. by her order dated march 31, 1979, she has cancelled the assessment by following the judgment in the case of manoo lal kedarnath's case : [1978]114itr884(all) . feeling aggrieved, the revenue preferred an appeal before the tribunal. the tribunal held that the appellate assistant commissioner while cancelling the reassessment order dated july 31, 1976, framed by the assessing authority had emphasised that there was no bona fide belief on the basis of definite information which could constitute a basis for the assessing officer to say that income had escaped assessment and that while passing the reassessment order dated december 26, 1978, he did not do anything new because items of income and deduction for computation of income have been found to be identical as those taken into consideration in the first reassessment proceedings. secondly, the assessment order by the assessing officer was sought to be justified on the ground that he had asked for, and had obtained the sanction of the commissioner for reassessment of the proceedings. the tribunal has concluded in paragraph 10 as under:from the facts stated above, it is clear that even the commissioner did not apply his mind properly to come to a conclusion whether there was escapement of income because the very reasons on the basis of which reassessment earlier had been struck down by the appellate assistant commissioner were taken again to initiate second reassessment proceedings. in our opinion, the case is, therefore, directly covered by the judgment of the allahabad high court in which the hon'ble court has relied upon the judgment of the supreme court in the case of rao thakur narayan singh : [1965]56itr234(sc) . the reassessment proceedings are bad and as such were rightly annulled by the appellate assistant commissioner. her order is upheld.8. feeling aggrieved, the department approached this court and this court issued directions under section 256(2) of the act in i.t.c. no. 46 of 1982 on august 24, 1988, directing the tribunal to refer to this court the substantive question of law noticed in the opening paragraph of this judgment.9. after hearing learned counsel for the revenue, we are of the considered view that the question raised has to be answered against the revenue because after the reassessment order dated july 31, 1976, was set aside by the appellate assistant commissioner vide its order dated february 20, 1978, the assessing officer had no jurisdiction to once again embark upon the same proceedings. the aforementioned proposition of law is answered against the revenue by the hon'ble supreme court in the case of cit v. rao thakur narayan singh : [1965]56itr234(sc) . the observations of the hon'ble the supreme court in that regard read as under (page 239):.the tribunal held in the earlier proceedings that the income-tax officer knew all the facts at the time he made the original assessment in regard to the income he later on sought to tax. the said finding necessarily implies that the income-tax officer had no reason to believe that because of the assessee's failure to disclose the facts income has escaped assessment. the earlier finding is comprehensive enough to negative 'any such reason' on the part of the income-tax officer. that finding is binding on him. he could not on the same facts reopen the proceedings on the ground that he had new information. if he did so, it would be a clear attempt to circumvent the said order, which had become final....10. the ratio of the judgment of the hon'ble supreme court has been followed by the division bench of the allahabad high court in the case of manoo lal kedarnath : [1978]114itr884(all) .11. in view of the above enunciation of law, we are of the view that the question posed at the outset has to be answered against the revenue and in favour of the assessee. accordingly the reference is disposed of.