Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors. - Court Judgment

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
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			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
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		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
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		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
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		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
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		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
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			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
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			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
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			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
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			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
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			'decidedon' => '2004-08-20',
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			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
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		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
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		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
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	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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Sadhan Kumar Gupta, J.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
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	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
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$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
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$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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the following facts of accounting of income and liabilities of the assessee-company came to light.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
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$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
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	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(a) Income from forfeiture of lapsed certificates.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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			'circuit' => null
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	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
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		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
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		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
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	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
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			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
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	)
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
)
$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
	)
)
$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$args = array(
	(int) 0 => '884415',
	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
$ctype = ' High Court'
$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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$casename_url = 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.

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	'title_for_layout' => 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '884415',
			'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
			'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
			'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
			'authreffered' => '',
			'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
			'citingcases' => '',
			'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
			'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
			'court' => 'Kolkata',
			'court_type' => 'HC',
			'decidedon' => '2004-08-20',
			'deposition' => 'Appeal allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
			'judgement' => '<p style="text-align: justify;">Sadhan Kumar Gupta, J.</p><p style="text-align: justify;">1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p style="text-align: justify;">2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p style="text-align: justify;">'1. On the basis of information available in</p><p style="text-align: justify;">(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p style="text-align: justify;">(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p style="text-align: justify;">the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p style="text-align: justify;">(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p style="text-align: justify;">(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p style="text-align: justify;">(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p style="text-align: justify;">(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p style="text-align: justify;">2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p style="text-align: justify;">(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p style="text-align: justify;">(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p style="text-align: justify;">3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p style="text-align: justify;">(a) Income from forfeiture of lapsed certificates.</p><p style="text-align: justify;">(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p style="text-align: justify;">(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p style="text-align: justify;">(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p style="text-align: justify;">(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p style="text-align: justify;">4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p style="text-align: justify;">3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p style="text-align: justify;">(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p style="text-align: justify;">(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p style="text-align: justify;">(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p style="text-align: justify;">4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p style="text-align: justify;">5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p style="text-align: justify;">'If, -</p><p style="text-align: justify;">(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p style="text-align: justify;">(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p style="text-align: justify;">he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p style="text-align: justify;">6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p style="text-align: justify;">'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p style="text-align: justify;">7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p style="text-align: justify;">8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p style="text-align: justify;">'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p style="text-align: justify;">9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p style="text-align: justify;">10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p style="text-align: justify;">11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
			'ratiodecidendi' => '',
			'respondent' => 'Deputy Commissioner of Income-tax and ors.',
			'sub' => 'Direct Taxation',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner',
	'args' => array(
		(int) 0 => '884415',
		(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$title_for_layout = 'Peerless General Finance and Investment Co Ltd Vs Deputy Commissioner of Income Tax and ors - Citation 884415 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '884415',
		'acts' => '<a href="/act/51330/income-tax-act-1961-complete-act">Income Tax Act, 1961</a> - Sections 147 and 148; ;<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 226',
		'appealno' => 'MAT Nos. 3139, 3140 and 3141 of 2002 and CAN Nos. 9028, 9032 and 9033 of 2002',
		'appellant' => 'Peerless General Finance and Investment Co. Ltd.',
		'authreffered' => '',
		'casename' => 'Peerless General Finance and Investment Co. Ltd. Vs. Deputy Commissioner of Income-tax and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.;',
		'citingcases' => '',
		'counselplain' => 'Debi Pal, ;R.K. Murarka, ;M. Seal and ;Ananda Sen, Advs.',
		'counseldef' => 'P.K. Ghosh, ;R.N. Mitra and ;Md. Nizamuddin, Advs.',
		'court' => 'Kolkata',
		'court_type' => 'HC',
		'decidedon' => '2004-08-20',
		'deposition' => 'Appeal allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => 'Aloke Chakrabarti and ;Sadhan Kumar Gupta, JJ.',
		'judgement' => '<p>Sadhan Kumar Gupta, J.</p><p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.</p><p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :</p><p>'1. On the basis of information available in</p><p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;</p><p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,</p><p>the following facts of accounting of income and liabilities of the assessee-company came to light.</p><p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.</p><p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.</p><p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.</p><p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.</p><p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :</p><p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.</p><p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.</p><p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :</p><p>(a) Income from forfeiture of lapsed certificates.</p><p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'</p><p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.</p><p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.</p><p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.</p><p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'</p><p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :</p><p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;</p><p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and</p><p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.</p><p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.</p><p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :</p><p>'If, -</p><p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or</p><p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,</p><p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'</p><p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :</p><p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'</p><p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.</p><p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :</p><p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'</p><p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'</p><p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.</p><p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)',
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		'pubs' => '(2005)195CTR(Cal)161,[2005]273ITR16(Cal)',
		'ratiodecidendi' => '',
		'respondent' => 'Deputy Commissioner of Income-tax and ors.',
		'sub' => 'Direct Taxation',
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	(int) 1 => 'peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$url = 'https://sooperkanoon.com/case/amp/884415/peerless-general-finance-investment-co-ltd-vs-deputy-commissioner'
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$caseref = 'Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.<br>'
$content = array(
	(int) 0 => '<p>Sadhan Kumar Gupta, J.',
	(int) 1 => '<p>1. All the mandamus appeals were heard analogously as the facts and law involved in those appeals are the same and almost identical. Those three mandamus appeals arose out of the writ applications bearing No. C. O. 4959(W) of 1989, CO. 4960(W) of 1989 and C.O. 4961 (W) of 1989. By a single judgment dated August 8, 2002 (see : [2002]258ITR160(Cal) ), the learned single judge of this court, disposed of those three writ petitions against the appellants. Being aggrieved and dissatisfied with the said order of the learned single judge, the present appeals have been preferred by the appellant.',
	(int) 2 => '<p>2. The writ applications were instituted by the appellant challenging the notice issued under Section 148 of the Income-tax Act, 1961, for the purpose of reopening the assessment of the company for the years 1981-82, 1980-81 and for the assessment year 1973-74. By issuing the said notice, the Income-tax Officer proposed to reopen the assessment of the appellant-company for those three years. The Income-tax Officer issued those notices under Section 148 of the Income-tax Act on grounds which are identical in nature. The said notice under Section 148 of the Act was issued on the ground as follows :',
	(int) 3 => '<p>'1. On the basis of information available in',
	(int) 4 => '<p>(a) the auditors' observations in the annual reports of Peerless for 1986 (assessment year 1987-88) and 1987-88 (15 months ending on March 31, 1988, relevant to the assessment year 1988-89) ;',
	(int) 5 => '<p>(b) the Supreme Court's observations in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 6 => '<p>(c) the report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979,',
	(int) 7 => '<p>the following facts of accounting of income and liabilities of the assessee-company came to light.',
	(int) 8 => '<p>(1) The Social Welfare Scheme Fund is in excess of the total liability of the company towards the certificate holders.',
	(int) 9 => '<p>(2) The company has been retaining in the fund amounts forfeited on surrender of certificates and liabilities already provided thereon on accrual basis. Amounts in respect of unclaimed matured certificates continue to remain in the fund even after maturity. Amounts in respect of lapsed certificates also continue to remain in the fund.',
	(int) 10 => '<p>(3) The generous distribution of commission among the agents out of the first year's subscription and the class of investors tapped by such agents have resulted in large scale dropouts by the investors after the first year.',
	(int) 11 => '<p>(4) There was large scale lapsation of certificates varying between 34.26 per cent, and 59.71 per cent., during the first three years, the forfeiture range.',
	(int) 12 => '<p>2. While checking the income accounting for the previous year relevant to the assessment year 1985-86, it was found that the assessee has been furnishing incorrect computation of income on the basis of wrong assumption and inflated generalisation as under :',
	(int) 13 => '<p>(i) The provision for refund of subscription at a fixed percentage of the first year's subscription was in respect of pure contingent liability. The quantification of such liability was on the basis of flawed actuarial certificate.',
	(int) 14 => '<p>(ii) The provision of interest and bonus accrued at a fixed percentage of the balance in the Social Welfare Scheme Fund on accrual basis was incorrect even on actuarial basis, which the assessee was supposed to be following.',
	(int) 15 => '<p>3. On a check of the abovementioned facts of the accounting of income and expenditure, it emerged that income exceeding Rs. 50,000 has escaped assessment in the following respects as a result of inadequate and incorrect statements, misleading actuarial certificate, wrong basis of calculation and suppression of relevant facts :',
	(int) 16 => '<p>(a) Income from forfeiture of lapsed certificates.',
	(int) 17 => '<p>(b) Profit under Section 41(1) of the Income-tax Act as a result of cessation of liability already claimed as 'interest and bonus accrued.'',
	(int) 18 => '<p>(c) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the Social Welfare Scheme Fund on the ground that the fund was in excess of the requirement.',
	(int) 19 => '<p>(d) Excess deduction claimed under the head, 'Interest and bonus accrued', at a fixed percentage of the balance in the said fund on the ground that such percentage was in excess of the amount allowable on accrual basis.',
	(int) 20 => '<p>(e) Deduction claimed under the head, 'Provision for refund of subscription' on the strength of wrong actuarial advice.',
	(int) 21 => '<p>4. In the circumstances stated above, I have reason to believe that, by reason of the omission and failure on the part of the assessee, the Peerless General Finance and Investment Co. Ltd., to disclose fully and truly all material facts necessary for its assessment for the assessment year 1981-82, income exceeding Rs. 50,000 has escaped assessment for that year.'',
	(int) 22 => '<p>3. So it appears from the said notice that the Income-tax Officer preferred to issue the same on the basis of the information available to him and those are :',
	(int) 23 => '<p>(a) Auditor's observation in the annual reports of Peerless for the assessment years 1987-88 and 1988-89 ;',
	(int) 24 => '<p>(b) The Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 ; and',
	(int) 25 => '<p>(c) The report of the Reserve Bank of India on inspection of the books of Peerless conducted in 1979.',
	(int) 26 => '<p>4. Thus it is clear that the Assessing Officer's reason to believe that there was suppression of income by the appellant-company was on the basis of those three items mentioned above.',
	(int) 27 => '<p>5. In this respect, it is relevant to look into the provisions of Section 147 regarding income escaping assessment. Section 147 of the Income-tax Act, provides :',
	(int) 28 => '<p>'If, -',
	(int) 29 => '<p>(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or',
	(int) 30 => '<p>(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,',
	(int) 31 => '<p>he may, subject to the provisions of Sections 148 to 153 assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Sections 148 to 153 referred to as the relevant assessment year).'',
	(int) 32 => '<p>6. This provision clearly shows that if the Assessing Officer has any information in his possession which led him reasonably to believe that income chargeable has escaped assessment in respect of an assessee for a particular assessment year, then he can take steps as per the provisions of the Income-tax Act. In this respect Section 149 of the Act provides that the Assessing Officer can issue notice under Section 148 of the Act even in case of an assessment year prior to the date of issuance of notice but in no circumstance can the notice be issued beyond the prescribed time limit as provided in the said section. So far as the present case is concerned it appears that all the notices were issued in respect of assessment years which did not cross the limit of the prescribed years as provided under Section 149 of the Income-tax Act. But there is a bar to the Assessing Officer in this respect where four years have passed from the end of the relevant assessment year. In such a case sanction of the appropriate authority is required as provided in Section 151 of the Act. The said Section 151 of the Income-tax Act runs as follows :',
	(int) 33 => '<p>'In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 except by an Assessing Officer of the rank of Assistant Commissioner or Deputy Commissioner :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.'',
	(int) 34 => '<p>7. So the proviso to Section 151 provides that in our case, the sanction of the Chief Commissioner or Commissioner is required.',
	(int) 35 => '<p>8. Keeping all these things in mind let us now see whether the Assessing Officer was justified in issuing notice to the appellant-company for the purpose of reopening the assessment of the said company for the years 1981-82, 1980-81 and 1973-74. Law in this respect has been clearly laid down in the case reported in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) . At page 199 of the said decision, the hon'ble Supreme Court has clearly laid down the conditions which are required for the Assessing Officer for reopening of any assessment for a particular Year. The decision of the hon'ble apex court runs as follows :',
	(int) 36 => '<p>'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years from the end of the year in question.'',
	(int) 37 => '<p>9. In the said decision it has also been observed that it is the preliminary duty of every assessee to disclose fully and truly all material facts necessary for his assessment. The duty of disclosing all the primary facts relevant to the decision to be arrived at by the Assessing Officer lies on the assessee. If such disclosure is made by the assessee then his duty is over and then the duty shifts upon the Assessing Officer to look into the return and to see whether all the facts necessary have been truly and fully disclosed or not. The hon'ble apex court in the abovementioned decision at page 201 clearly observed : 'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else- far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn'. So, as soon as the assessee files his return by disclosing all the relevant facts fully and truly, his duty is over and it is for the Assessing Officer to either accept it or to reject it. Once the assessment is accepted it is not permissible for the Assessing Officer to reopen it again on any flimsy ground. Law in this respect is very much clear as provided in Section 147 of the Income-tax Act. It has been clearly laid down in the said section that the Assessing Officer can reopen the assessment of a particular year if he has reason to believe that there was omission or failure on the part of an assessee to make a proper return under Section 139 of the Act for any particular assessment year. So the main thing is that, the Assessing Officer must have reason to believe that there was omission or failure on the part of the assessee to disclose fully its income. In the decision reported in Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) , the meaning of the word ''has reason to believe' has been elaborately discussed. In the said decision, the hon'ble court held to the effect (page 11) : 'The important words under Section 147(a) are 'has reason to believe' and the words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.'',
	(int) 38 => '<p>10. The principles as decided in those two cases were also followed in the cases reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) ; ITO v. Madnani Engineering Works Ltd. : [1979]118ITR1(SC) ; Johri Lal (HUF) v. CIT : [1973]88ITR439(SC) ; ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) . As against this the learned advocate for the Revenue cited decisions reported in Noshirwan v. WTO : [1996]222ITR302(MP) ; Sri Krishna Pvt Ltd. v. ITO : [1996]221ITR538(SC) ; ITO v. Biju Patnaik : [1991]188ITR247(SC) ; ITO v. Mahadeo Lal Tulsian : [1977]110ITR786(Cal) ; Phool Chand Bajrang Lal v. ITO : [1993]203ITR456(SC) ; Raymond Woollen Mills Ltd. v. ITO : [1999]236ITR34(SC) and also in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT : [1999]236ITR832(Guj) and also certified copy of a judgment passed by the Division Bench of this court in F. M. A. No. 372 of 1978. We have considered all these decisions. It appears from all these decisions that there is practically no dispute regarding the principles as laid down in Calcutta Discount Co. Ltd. v. ITO : [1961]41ITR191(SC) and also Ganga Saran and Sons P. Ltd. v. ITO : [1981]130ITR1(SC) . From those decisions, it is clear that before issuing a notice the Assessing Officer must have reason to believe that the assessee failed to furnish full and true disclosure of his income for a particular year. In this respect we have already pointed out that the Assessing Officer relied upon the Supreme Court's observation in the case reported in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663 and the report of the Reserve Bank of India and inspection of the books of Peerless conducted in the year 1979. Let us now discuss the present case on the basis of legal principles as discussed above.',
	(int) 39 => '<p>11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)'
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11. We have already pointed out that the Assessing Officer has got enough power for reopening the assessment of a particular company for a particular year, provided he has reason to believe that the income of the assessee for a particular year escaped assessment due to suppression of the said income by the assessee concerned. It is the admitted position that three reasons were cited by the Assessing Officer in issuing notice under Section 148 of the Income-tax Act in the name of the appellant-company. Let us now look into those reasons and see how far the Assessing Officer was justified in issuing the said notice. One of such reasons was the Supreme Court's observation in the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663. We have perused the said judgment of the hon'ble Supreme Court wherein it has been observed (page 677) : '. . . we have no information about the findings in the course of the inspection. Evidently, nothing objectionable was found. This is apparent from the affidavit filed on behalf of the Reserve Bank of India in the Calcutta High Court. This position was considered satisfactory by the Reserve Bank of India.' Again the hon'ble court observed (page 678): 'It was finally stated 'having regard to the satisfactory financial position of the Peerless and the fact that it was a well established one and having regard to the certificate furnished by the actuarial consultant of Peerless supported by data, it was granted exemption from the provisions of paragraph 4 of the 1973 directions. . .'.' Again, if we look at page 685 of the said decision of the hon'ble apex court then it will appear that the hon'ble apex court referred to an inspection made by the Reserve Bank of India in the year 1979. In considering the said report, the Supreme Court observed that the team in its report pointed out various unhealthy features of the schemes managed by the Peerless company. In fact the principal unhealthy features as pointed out were also noted by the hon'ble Supreme Court at page 685. But nowhere in the judgment of the hon'ble Supreme Court, as relied on by the Assessing Officer in issuing the notice, or in the inspection report, was it pointed out that the appellant-company omitted or failed to disclose fully and truly all material facts relevant for the assessment year 1973-74. There was nothing to suggest from this decision that the income of the appellant-company for the said assessment year escaped assessment on account of any omission or failure on the part of the company to disclose fully or truly all the material facts. Undoubtedly the Supreme Court took notice of some unhealthy practices allegedly conducted by the company in running its business but the said practice has got no nexus or live link with the escapement of income as claimed by the Assessing Officer. The Supreme Court never observed in the said decision that there was escapement of income on account of such unhealthy practice. In this respect the learned advocate for the appellant cited the decision reported in Coca-Cola Export Corporation v. ITO : [1998]231ITR200(SC) . In that case there was violation of the provision in respect of remittance of foreign exchange as provided in the Foreign Exchange Regulation Act, 1973. It has been held in the said decision that if any remittance of foreign exchange had been made in excess of the prescribed limit then it was for the Reserve Bank of India or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. The hon'ble apex court clearly held (headnote) : 'That, however, could not be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under Section 147(a)