TARAJAN TEA CO. (P.) LTD. VS COMMISSIONER OF INCOME-TAX, 1993 PTD-GUJARAT-HIGH-COURT-INDIA 1289 (1992)

1993 P T D 1289

[200 ITR 12]

[Gauhati High Court (India)]

Before S.N. Phukan and J.M. Srivastava, JJ

TARAJAN TEA CO. (P.) LTD.

Versus

COMMISSIONER OF INCOME-TAX

Income-tax Reference No.7 of 1986, decided on 03/02/1992.

(a) Reassessment-----

---- Failure to disclose material facts necessary for assessment---Information that income has escaped assessment---Notices under CIS. (a) & (b) pr S.147 are issued on different grounds---Notice issued under S.147(a)---Subsequent decision by I.T.O. to proceed under S.147(b)---Notice not issued under S.147(b)---Reassessment not valid---Indian Income-tax Act, 1961, Ss.147 & 148.

Clauses (a) and (b) of section 147 of the Income-tax Act, 1961, are to be invoked for different purposes and on the basis of different materials. Clause (a) can be invoked if there is non-disclosure of material facts by the assessee and clause (b) can be invoked in consequence of information in the possession of the Income-tax Officer even though there was no omission or failure on the part of the assessee to disclose all material facts. For initiation of proceedings under clause (a) or clause (b) separate notice has to be issued under section 148. A notice under section 147(a) cannot be treated as a notice under section 147(b). The issue of a valid notice is not merely a procedural requirement but is a condition precedent for the exercise of the jurisdiction to reassess.

The assessee received Rs.15 lakh consideration of a licence to cut and remove trees of spontaneous growth. The amount was to be paid in three instalments. The assessee had disclosed the receipt of Rs.5 lakh in the relevant accounting year and claimed it as a capital receipt and this was accepted by the Income-tax Officer. Subsequently another Income-tax Officer held that capital gains liable to tax on the transfer of a capital asset, i.e. forest trees of spontaneous growth, had escaped assessment and that the relevant details regarding the capital gains had not been furnished and initiated action under section 147(a) by issuing notice under section 148. Subsequently; the Income tax Officer made another entry in the, order sheet stating that in a connected case, the Appellate Assistant Commissioner had, held that the receipt was of revenue nature and accordingly action was initiated under section 147(b). However, no notice under section 148 was issued on the ground that notice under section 148 had already been issued earlier in connection with the proceedings under section 147(a). The Tribunal was of the opinion that there was no case for reopening of the assessment under clause (a) of section 147. However, according to the Tribunal, as proceedings under clause (a) of section 147 was validly initiated it could be converted to a proceeding under clause (b) of section 147. The Tribunal finally accepted the appeals filed by the Revenue and modified the order of the Appellate Assistant Commissioner to the extent that instead of cancelling the assessment orders they would only be set aside and the Income-tax Officer was given liberty to proceed afresh in accordance with section 144-B. On a reference:

Held, (i) that as no fresh notice had been issued under section 147(b), there was absence of jurisdiction on the part of the Income-tax Officer to initiate proceedings under section 147(b). Moreover, the Income-tax Officer treated the order of the Appellate Assistant Commissioner in another case as information for purposes of section 147(b) but this piece of information was not available with the Income-tax Officer when the order, dated March 21, 1977, was passed. Merely because the subsequent Income-tax Officer changed his opinion, reopening of the assessment under section. 147(b) was not tenable. The reassessment proceedings were not valid;

(ii) that the direction of the Tribunal to the Income-tax Officer to proceed afresh in accordance with section 144-B was bad in law. The Tribunal did not consider the question of limitation as laid down in section 153. Reassessment at this stage would be against the Legislative mandate as provided in the said section 153. and, that, apart, if this were allowed, the litigation would never end.

Abdul Rab Abdul Salam v. I.T.O. (1988) 174 ITR 424; (1988) 2 GLR 75 (Gauhati); Calcutta Discount Co. Ltd. v. I.T.O. (1961) 41 ITR 191 (SC); AIR 1961 SC 372: Hukumchand Mills Ltd. v. State of Madhya Pradesh (1964) 52 ITR 583 (SC); I.T.O. v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC); I.T.O. v. Mewalal Dwarka Prasad (1989) 176 ITR 529 (SC); AIR 1989 SC 1088; Indian and Easter Newspaper Society v. C.I.T. (1\979) 119 ITR 996 (SC); Narayanappa (S.) v. C.I.T. (1967) 63 ITR 219 (SC); Niranjan and Co. (P.) Ltd v. CIT (1986) 159 ITR 1.53 (SC); A I R 1986 SC 1853; Sirpur Paper Mills Ltd. v. I.T.O. (1978) 114 ITR 404 (AP.); Sonai River Tea Co. Ltd. v. C.I.T. (1990) 182 ITR 162 (Gauhati); Tansukhrai Bodulal v. I.T.O. (1962) 46 ITR 325 (Assam) (F.B.); Tranvancore Tea Estates Co. Ltd. v. C.I.T. (1974) 93 ITR 314 (Ker.) and Upadhyaya (R.K.) v. Shanabhai (P.) Patel (1987) 166 ITR 163 and AIR 1987 SC 1378 ref.

(b) Income-tax---

----Reassessment---Information that income has escaped assessment---Change of opinion would not justify proceedings under S.147(b)---Reassessment proceedings on the basis of order of A.A.C.---Order of A.A.C. not available to I.T.O. when he started proceedings under S.147(b)---Proceedings under S.147(b)---Not valid---Indian Income-tax Act, 1961, S.147(b).

(c) Income-tax---

----Reassessment---Draft assessment order---Appeal to Appellate Tribunal-- Tribunal finding that reassessment was not valid---Tribunal cannot direct I.T.O. to proceed under S.144-B without taking into account provisions of S.153---Indian Income Tax Act, 1961, Ss.144-B, 148 and 153.

J.P. Bhattacharjee, M.K. Sharma and A.K. Saraf for the Assessee.

D.K. Talukdar and B.J. Talukdar for the Commissioner.

JUDGMENT

S.N. PHUKAN, J.--- On the prayer of the assessee, the Appellate Tribunal referred 7 (seven) questions for opinion of this Court under section 256(1) of the Income-tax Act, 1961 (for short, "the Act"). After hearing Mr J.P. Bhattacharjee, learned senior counsel for the assessee, and Mr. D.K. Talukdar, learned counsel for the Revenue, we are of the opinion that to pinpoint the real issues, the questions may be refrained and accordingly by order, dated August 12, 1991, we have refrained the questions and the said three reframed questions are quoted below:--

. "(1)Whether, on the facts and in the circumstances of the case, the Tribunal having held that there was no case for reopening the assessment under section 147(a) of the Income Tax Act, 1961 on the reasons recorded, nor any cause for reopening of the assessment under section 147(b) of the Act on the reasons recorded on March 21, 1977, was justified in law in sustaining the reopening of assessment under section 147(b) of the Act on the reasons and grounds given in the order passed on appeal?

(2)Whether on the facts and in the circumstances of the case the Tribunal was justified in law in holding that the reassessment proceedings initiated under section 147(a) of the Act by issue of notice, dated December 31, 1976, under section 148 of the Act on the reasons recorded, could be validly converted into a proceeding under section 147(b) of the Act subsequently?

(3)Whether, on the facts and in the circumstances of the case the Tribunal was justified in law in setting aside the order of the Appellate Assistant Commissioner of Income-tax cancelling the reassessment orders passed by the Income-tax Officer in ignorance of section 144-B of the Act and in directing the Income-tax Officer to resort to the provisions of section 144-B afresh instead of annulling and/or cancelling the reassessment orders and without also taking into consideration the legal bar of limitation for the passing of reassessment orders under section 153 of the Act?"

The present reference relates to the assessment years 1972-73, 1973-74 and 1974-75. The controversy in the present reference' is for reopening of the assessment under section 147 of the Act.

The assessee was carrying on its business in growing, manufacturing and sale of tea. The assessee entered into an agreement with Messrs Assam Forest Products (P.) Ltd. on March 30, 1971. The said company, namely, Assam Forest Products (P.) Ltd., was under the same management of the assessee-company. The agreement is at Annexure-A of the paper book. The agreement was entered into as Messrs Assam Forest Products (P.) Ltd., who was in need of timber for carrying on its business and by the said agreement the licence was granted by the assessee to Messrs Assam Forest Products (P.) Ltd., to cut, fell and remove all trees of spontaneous growth from the areas of land earmarked and to be- earmarked from time to time so that the land became suitable for cultivation of tea plantation arid/or other cultivation. The period of lease was three years,. i.e., from January 1, 1971, to December 31, 1973, and the consideration was Rs. 15 lakh payable in three instalments. Accordingly, the assessee was paid Rs. 5 lakh for each assessment year in question. The Income-tax Officer after considering various decisions of the apex Court as well as other Courts came to the finding from the facts and circumstances of the cases for each assessment year that the receipt of Rs. 5 lakh for each assessment year by transfer of forest by the assessee was not a revenue receipt but a capital receipt and accordingly, the assessment order was made. Subsequently, another Income-tax Officer on December 31, 1976 recorded the following order in the order sheet:

"The assessee received Rs. 5 lakh from Assam Forest Products (P.) Ltd. towards sale of standing trees of spontaneous growth in its T.E. grant in the accounting year, which was duly credited to the profit and loss account. There was an agreement, dated March 30, 1971, between the assessee and the said company under which the total amounts payable will be Rs. 15,00,000 in three equal instalments during the years 1971, 1972 and 1973. Accordingly, the assessee credited Rs. 5 lakh for each year. In the assessment made under section 143(3) on September 28, 1975, it was held after considering judicial decisions that the amounts received by the assessee were of the nature of capital receipt and not revenue receipt and as such the same was not includible in the total income, '

It now appears that even though the receipts are of capital nature but being receipts from transfer of capital assets, yielded capital gains ... the provisions of the Income-tax Act, 1961. In this connection, the decision of the Court in Travancore Tea Estates Co. Ltd. v. CIT (1974) 93 ITR 314 (Ker) may be referred to.

I am, therefore, satisfied that capital gains liable to tax on transfer of la capital asset, i.e., forest trees of spontaneous growth, escaped assessment in this case for the year. The assessee only claimed that the receipts are exempt from tax and mentioned in Part III of the return.

The relevant details as to capital gains were not furnished in the return. I have, therefore, reason to believe that income chargeable to tax escaped assessment for non-disclosure of all material facts is fully and truly. . .

"Issue notice under section 148.

(Sd.) Income-tax Officer:"

Again on March 21, 1977, the Income-tax officer made another entry in the order sheet which is reproduced below:--

"Action under section 147(a) was initiated in this case and a notice under section 148 was served on the assessee. The reasons were recorded on December 31; 1976, in the connected case of Hapjan Purbat Tea Co. Ltd. The question involved was whether sale of standing trees constituted revenue receipt or capital receipt. The Appellate Assistant Commissioner in Appeal No.347/Dib of 1975-76 dated January 25, 1977, held that the receipts were of revenue nature from an adventure in the nature of trade. The facts in the present case are identical. The finding of the Appellate Assistant Commissioner is an information in consequence of which I have reason to believe that income chargeable to tax being receipts of sale of standing trees escaped assessment. Action under section 147(b) is, accordingly, initiated. However, since a notice had already been issued within the prescribed time-limit, there was no need for issue of afresh notice."

The assessee objected to the reopening of the proceedings which was rejected by the Income-tax Officer and after considering the merits of the case the Officer held that sale of trees of spontaneous growth were not capital receipts nor was it agricultural income and they were of the nature of revenue receipts and as such assessable to tax. The reassessment orders are available at Annexure "D-1", "D-2" and "D-3".

The appeal by the assessee before the Appellate Assistant Commissioner was allowed by a consolidated order, dated March 31, 1978, at Annexure "E" to the paper book. The Appellate Assistant Commissioner noted that in the first return filed by the assessee, the amount of Rs.5 lakh was shown in Part III of the return and the matter was fully dealt with by the Income-tax Officer in the original assessment order and as such there was no failure at any stage by the assessee to disclose the preliminary facts. The Appellate Assistant Commissioner also was of the view that conversion of the proceedings from clause (a) to clause (b) of section 147 of the Act was not permissible and that the reassessments were bad inasmuch as section 144-B was not complied with. Accordingly, the reassessments for all the three years were cancelled. Appeals were filed by the Revenue before the Appellate Tribunal and by order, dated July 31, 1980, the order of the Appellate Assistant Commissioner was set aside, but this order was recalled on an application filed by the assessee on the same day. Subsequently, the Appellate Tribunal, after hearing afresh and on consideration of the facts and the contentions made before it, was of the opinion that there was no case for reopening of the assessment under clause (a) , of section 147 of the Act. However, according to the Appellate Tribunal, as proceedings under clause (a) of section 147 were validly initiated they could be converted into proceedings under clause (b) of section 147. The Appellate Tribunal finally accepted the appeals filed by the revenue and modified the order of the Appellate Assistant Commissioner to the extent that instead of cancelling the assessment orders they were only set aside and the Income-tax Officer was given liberty to proceed afresh in accordance with section 144-B of the Act.

We find that after the final order was passed by the Appellate Tribunal, a petition was filed for correction of some mistakes in the final order of the Tribunal and this petition was accepted and from the final order some vital portions of the order were deleted.

According to Mr. J.P. Bhattacharjee, learned senior counsel for the assessee, in view of the finding recorded by the Appellate Tribunal in paragraph 9 of the order, the final order of the Tribunal is not sustainable. We quote below the said paragraph 9 of the order:--

"Coming to the merits of the case, we are of the opinion that as far as the reasons recorded in the order, dated March 21, 1977, are concerned, they are insufficient to reopen an assessment. The question as to whether sale of standing trees constituted capital receipt was not new to the Income-tax Officer In the original assessment order for the year 1972-73, he had fully gone into the matter and referred to as many as five judgments of the Supreme Court and the various High Courts to hold that the income from sale of trees was of capital nature. The decision of the Appellate Assistant Commissioner, in Hapjan Purbat Tea Company was not any new information because even before the decision of the Appellate Assistant Commissioner the Income-tax Officer assessing that company had held the income from the sale of trees as being of revenue nature. In other words, there was a difference of views between the two Income-tax Officers. It is well settled that change of opinion by the Income-tax Officer cannot be -considered as information enabling him to initiate reassessment proceedings if while making the original assessment he had only considered the relevant provisions of law and the subject. This proposition is so well-established that no authorities need be referred for it. But if any authority is required, we may refer to Indian and Eastern Newspaper Society v. C.I.T. (1979) 119 ITR 996:'

It may be stated that the last line of paragraph 9 of the order, namely, "We are, therefore, of the opinion that action taken in pursuance of the second notice would not be good in law" was deleted in view of the miscellaneous petition filed by the assessee as factually no second notice was issued by the income-tax Officer before taking action under clause (b) of section 147 of the Act.

We are in full agreement with Mr. Bhattacharjee that in view of the above finding of the Appellate Tribunal there was no scope for the Tribunal to modify the orders of the Appellate Assistant Commissioner.

Be that as it may, as the questions have been referred to us we have to consider all the questions. .

Clause (a) of section 147 of the Act, inter alia, provides that if the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee 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, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or re-compute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. Clause (b) of the said section 147, inter alia, empowers the Income tax Officer subject to the provisions of sections 148 to 153 to assess or reassess any income or re-compute the loss or the depreciation allowance if notwithstanding that there has been no omission or failure. as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year.

Section 148 of the Act, inter alia, provides that before making any assessment, reassessment or re-computation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 139 of the Act and further before issuing such notice, the Income-tax Officer shall record his reasons. Section 149 fixes the time limit for such notice. We are not concerned with section 150 in the present reference. Under section 151 sanction is necessary for issuance of notice after the expiry of eight years from the end of the relevant assessment year. Section 153 fixes the time limit for completion of assessments and reassessments and subsection (2) is in respect of proceedings under section 147.

Section 144-B was introduced in the Act by the amending Act of 1975 but later repealed with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987. There is no dispute at the Bar that the said section is applicable to the present reference. The said section, inter alia, provides that if the Income-tax Officer proposes to make any variation in the income or loss returned to such an amount, as may be fixed by the Board, a draft proposed order of assessment has to be sent to the assessee and if it is objected to, the draft order alongwith the objection shall be sent to the Inspecting Assistant Commissioner who, after going through the records, may issue such direction, after giving an opportunity to the assessee, to the Income-tax Officer and such direction shall be binding on the Income-tax Officer.

In Calcutta Discount Co. Ltd. v. I.T.O. (1961) 41 ITR 191; A I R 1961 SC 372, the apex Court had occasion to consider clause (a) of section 34 of the old Income-tax Act of 1922 and held that the expression "material facts" used in the said clause (a) referred only to primary facts and the duty of the assessee was confined to disclosure of primary facts and he had not to indicate what factual or legal inferences should properly be drawn from the primary facts. The assessee has to disclose fully and truly all material facts necessary for assessment for that year. According to their Lordships the duty of the assessee does not extend beyond full and truthful disclosure of all material facts and once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. Their Lordships also held that it is for the assessing authority to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn and 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.

In the case in hand, the assessee disclosed the receipt of Rs.5 Lakh in Part III of the return. In other words, the assessee disclosed fully and truly all primary facts and, therefore, in view of the law laid down by the apex Court, it cannot be said that clause (aj of section. 147 of the Act could be invoked by the income-tax Officer. It may be stated that in the first' assessment order the Income-tax Officer considered this aspect of the matter keeping in view, as stated above, the various decisions of the apex Court and- other High Courts and held that the income of. Rs.5 lakh: was a capital receipt 'and hot a revenue receipt.

The successor-Income-tax Officer by the above order, dated December 31, 1976, took the view that income chargeable to tax hoc) escaped assessment for non-disclosure of material facts fully and truly. This order, dated December 3-1-1976 is not sustainable its law in view of what has been stated above. Realising 'the legal position by order, dated 'March 21; 1977, proceedings under section 147(6) was initiated. But in the said order, It was' recorded that no fresh notice under section 1'48 was necessary as a. notice was,' issued earlier pursuant to an order, dated December 31, 1976. The Appellate Tribunal also rightly held in paragraph' 6 of the order that there was no case for reopening of the assessments under section 147(a). .

Regarding the initiation of proceedings under clause (b) of section 147 of the Act, our attention has been drawn to, a decision of the Pull' Bench of this Court in Tansukhrai Bodulal v. I.T.O. 1962) 46 ITR 325; AIR 1961 Assam 35. The Full Bench of this Court held that issue of a valid notice under section'34' of the Act -of 1922 is not merely a procedure requirement but is' a condition precedent for the exercise of the, jurisdiction by the Income-tax Officer to reassess the assessee under the said section 34: The full Bench went to tare extent of holding that such notice cannot be waived and that want of notice affects the jurisdiction 'of the Income-tax Officer to proceed with the assessment and, therefore; affects such proceedings of assessment. The Court was of the opinion that merely filing a return under protest but without, prejudice to the contention of the assessee cannot be treated as waiver of the notice.

In the order of the Income-tax Officer, dated March 21, 1977 while initiating proceedings under clause (b) of the section 147 ef the Act, it was recorded that as notice under section 148 had already been issued within the time limit, there was no need for issue of afresh notice. The Income-tax Officer was referring to the notice issued pursuant to the order, dated December 31, 1976. Clauses (a) and (b) of section 147 are meant for two different classes of cases and in our opinion notice under section 147(a) cannot be treated as a notice under section 147(b). As no fresh notice was issued pursuant to the order, dated March 21, 1977, by the Income-tax Officer, we are of the opinion that there was absence of jurisdiction of the Income-tax Officer to initiate proceedings under the said clause (b) of section 147 of the Act.

The most important requirement for initiation of proceedings under section 147(b) is information in the possession of the Income-tax Officer regarding alleged escaped assessment. From the order, dated March 21, 1977, the Income-tax Officer treated the order of the Appellate Assistant Commissioner, dated January 25, 1977, in Hopjan Purbat Tea Co. Ltd. as information for the purpose of the above clause (b). From the order of the Appellate Assistant Commissioner, we find that this piece of information was not available with the Income-tax Officer when the order, dated March 21, 1977, was passed. In view of the above position we hold that the initiation of proceedings by the Income-tax Officer under clause (b) of section 147 of the Act is bad in law inasmuch as on that date no information was in the possession of the income-tax Officer and that apart, no notice as required under section 148 of the Act was also issued.

Another point, which has been urged by Mr. Bhattacharjee is that in the first assessment order the Income-tax Officer fully considered the-receipt of Rs.5 lakh for each assessment year and held that it was a capital receipt. According to Mr. Bhattacharjee if any income-tax Officer draws an inference, which appears subsequently to be erroneous, mere change of opinion with regard to the inference would not justify the initiation of action for reopening an assessment. In this connection, learned counsel has placed reliance on the decision of the apex Court in I.T.O. v. Lakhmani Mewal Das (1976) 103 ITR 437. We have perused the above decision of the apex Court and we are in` agreement with learned counsel that in the case in hand merely because the subsequent Income-tax Officer changed his opinion, reopening of the assessment under section 147(b) of the Act is not tenable in law. Their Lordships further held that two conditions have to be satisfied before an Income-tax Officer acquires jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, namely, (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee, (a) to make a return under section 139 for the assessment year to the Income-tax officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. It was also held that both these conditions must co-exist to confer jurisdiction on the Income-tax officer and it is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). According to their Lordships another requirement is that before notice is issued after the expiry of four years from tle end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax officer that it is a fit case for the issue of such notice and that the duty of the assessee is only to make full and true disclosure of the primary facts at the time of the original assessment. Once the assessee has done so his duty ends and it is for the Income-tax Officer to draw correct inferences from the primary facts.

In S. Narayanappa v. C.I.T. (1967) 63 ITR 219, the apex Court reiterated the legal position that two conditions must be satisfied in order to confer jurisdiction on the Income-tax Officer to issue notice under section 34 of the Indian Income-tax Act, 1922, namely, (i) the Income-tax Officer must have reason to believe that income profits or gains chargeable to income-tax had been underassessed; and (ii) he must have reason to believe that such underassessment had occurred by reason of either, (a) omission or failure on the part of the assessee to make a return of his income under section 22, or (b) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year and these conditions are conditions precedent to be satisfied before the Income-tax Officer acquires jurisdiction to issue notice under the section. Their Lordships also explained the expression "reason to believe" in section 34 and held that this expression does not mean a purely subjective satisfaction on the part of the Incometax Officer and the belief must be held in good faith; it cannot be merely a pretence. It was further held that proceedings for assessment or reassessment start with the issue of a notice and it is only after the service of the notice that the assessee, whose income is sought to be assessed or reassessed, becomes a party to these proceedings.

Coming to the case in hand we have already recorded that the income-tax Officer by the subsequent order decided to proceed under clause (b) of section 147 of the Act, but declined to issue notice under section 148 of the Act on the ground that while initiating proceedings earlier under clause (a) of section 147 of the Act notice under section 148 was issued. On perusal of these two clauses, we find that these clauses are to be invoked for different purposes and on the basis of different materials. Clause (a) can be invoked if there is non-disclosure of material facts by the assessee and clause (b) can be invoked in consequence of information in the possession of the Income-tax Officer even though there was no omission or failure on the part of the assessee to disclose all material facts. For initiation of proceedings under clause (a) or clause (b) separate notice has to be issued under section 148 of the Act. Unless a notice under section 148 is issued the Income-tax Officer does not get jurisdiction to proceed with the reassessment proceeding. We, therefore, hold that subsequent initiation of proceedings under clause (b) of section 147 is bad in law in view of the ratio laid down by the apex Court mentioned above.

Another contention of Mr. Bhattacharjee is that admission of fundamental primary facts cannot be withdrawn -and .a fresh litigation cannot be started with a view to obtain another assessment up on different assumption of facts and the Income-tax. Department cannot be permitted to start a fresh litigation because of, new views. In this connection; Mr. Bhattacharjee has placed reliance .on a decision of the Andhta Pradesh High Court in Sirpur. Paper Mills Ltd. v. I.T.O. (1978) 114 ITR 404, wherein the Andhra Pradesh High Court held as follows (at page 407):--

"The admission of a fundamental fact or primary fact cannot be withdrawn and a fresh litigation cannot be started with a view to obtain another assessment upon different assumption of facts. The Income-tax Department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the Weight of the circumstances. If this on would have no end; except when legal ingenuity is exhausted" To do so, is to divide one argument into two and to multiply the litigation"

In this connection, we 'may also refer to a decision of the Division Bench of this Court in. Abdul Rab Abdul Salam v. I.T.O. (1988) 174 ITR 424; (1988) 2 GLR 75: The Division Bench relying on the decision .of the Privy Council held that once the assessee disclosed material facts necessary and the assessment is finalised later; on a different conclusion on the same facts, the assessment cannot be reopened. Otherwise litigation will never end and the assessee can never rest in peace. The above ratios are applicable to the case in hand regarding initiation of proceedings under clause (a) of section 147. We have already held that initiation of proceedings 'under clause '(b) of the said section it also bad in law inasmuch as no notice under section 148 was issued and the 'materials were not available at the time of initiation of the proceedings.

Mr. Talukdar, learned counsel for the Revenue; has urged that in the present case it is not a conversion of the proceeding from clause (a) into clause (b). According to learned counsel, though in the first order, the Income tax Officer recorded initiation of proceedings under clause (a), in fact, it was a proceeding under clause (b), but we are unable to accept the contention of learned counsel inasmuch as the orders of the income-tax Officer are very clear and after proper application of mind by the first order it was 'decided to initiate' proceedings under clause (a) and thereafter by the second order to start proceedings under clause (b).

Mr. Talukdar has placed reliance on a decision of the apex Court in I.T.O. v. Mewalal Dwarka Prasad (1989) 176 ITR 529 (SC); AIR 1989 SC 1088, in support of his contention: In that case, We, find that notice was issued after four years but it was not indicated whether it was a notice under clause (1) or clause (b) of section. 147 and on these facts the Court held that section 149(1)(b) can', be invoked. But .we 'find from' paragraph 8 ' of the judgment that the apex Court held that notice being issued beyond the time provided under the law, the notice under section 148 of the Act cannot be sustained in law and accordingly the appeal by the assessee was allowed. This decision, in: our opinion, is of no help to the Revenue.

Another decision regarding wrong reference has been placed before us and the said decision of the apex Court was in Hukumchand Mills Ltd. v. State of Madhya Pradesh (1964) 52 ITR 583, wherein it was held that "it is well-settled that a wrong reference to the power under which action was taken by the Government would not per se vitiate that action if it could be justified under some other power under which the Government could lawfully do that act". This ratio is also not applicable to the case in hand in view of our earlier finding that proceedings under clause- (a) or clause (b) are to be initiated on different grounds and both, the orders of the Income tax Officer are clear on this point. There is no question of mentioning wrong section either in the first order or in the second order of the Income tax Officer

In the case in hand after the notice was issued pursuant to the first order, the return was filed. On the basis of this fact, Mr. Talukdar, learned counsel for the revenue, has urged that the income taxOfficer got jurisdiction to proceed with the case arid in support reliance-has been placed on a decision of the apex Court in Niranjan and Co. (P.) Ltd. v. C.I.T. (1986) 159 ITR 153 (SC); AIR 1986 SC 1853; (1986) Tax LR 867: In that case the apex Court clearly held that a. completed assessment can only be reopened if there was omission or failure on the part of the assessee to disclose fully and truly all material and relevant facts and the Income-tax Officer must have in his possession before he issues notice some material from which he can reasonably form a belief that there was so no escapement of income due to some failure or omission on the part of .the assessee to disclose fully all relevant or material facts. Regarding clause (b), the apex Court observed that notwithstanding that there was no omission or failure on the part of the assessee to disclose fully and, truly all material facts, the Income-tax Officer in consequence of information in his possession subsequent to the first assessment has reason to believe that income chargeable to tax has escaped assessment. From the facts of the case we find that at the time of original assessment the assessee had filed alongwith the return the balance-sheet which was taken note of by the Income tax Officer and thereafter the assessee filed a revised return showing some' profit and the Income tax Officer issued notice under section 147. But in the case in hand it is not so Primary, facts were disclosed .in the return by the assessee and for drawing up proceedings under clause (b) the information mentioned in the second order was not available with the Income-tax Officer as recorded by the Appellate Assistant Commissioner: So, the above ratio laid down by the apex Court is also of no help to the Revenue.

Mr. Talukdar has placed reliance on another decision of the apex Court in R.K. Upadhyaya v. Shanabhai (P.) Patel (1987) 166 ITR 163 (SC); AIR 1987 SC 1378. In that decision, the ratio laid down was that service of notice is not a condition precedent to conferment of jurisdiction on the Income-tax Officer, but it is a condition to the making of an order of assessment. We are unable to see how this decision will help the Revenue inasmuch as the reassessment order is not tenable in law unless a proper notice is served on the assessee.

Admittedly, there was non-compliance with the provisions of section 144-B. In the order of the Appellate Tribunal, it was held that instead of cancelling the assessment orders, the orders be set aside with a direction that the Income-tax Officer will be at liberty to proceed afresh in accordance with section 144-B of the Income-tax Act.

A Division Bench of this Court in Sanai River Tea Co. Ltd. v. C.I.T. (1990) 182 ITR 162; (1990) 1 GLR 62, considered the scheme of section 144-B and also noted that all orders under the said section are appealable under clause (d) of section 246. It was also noted that a second appeal is also provided to the Tribunal under section 254 and there is a rule of limitation under subsection (2-A) of section 153. Considering the scheme of the section and other provisions and also various decisions, this Court held that because of the variation in the proposed assessment the Income-tax Officer should have followed the procedure laid down in section 144-B, which was not done. The Court noted that instead, the Income-tax Officer arrogated to himself the powers to pass an assessment order when in law he was not vested with the power to do so. The Court was also of the opinion that the Income-tax Officer transgressed the Board's notification and transgressed the statutory provision in section 144-B. According to the Division Bench this was not a mere irregularity and accordingly annulled the assessment order.

Keeping in view the above ratio of the Division Bench of this Court we hold that the direction of the Appellate Tribunal to the Income-tax Officer to proceed afresh in accordance with section 144-B of the Act is bad in law.

We find that the Appellate Tribunal did not consider the question of limitation as laid down in section 153 of the Act. As, under the said section 153, limitation has been provided, we hold that reassessment at this stage will be against the legislative mandate as provided in the said section 153 and that apart, if this is allowed, litigation will never end.

For what has been stated above, we are of the opinion that (i) the Tribunal having held that there was no case for reopening of assessment under clause (a) of section 147 nor any case for reopening of assessment under clause (b) of the said section, the Tribunal was not justified in law in sustaining the reopening of assessment under clause (b), (ii) that the Tribunal was also not justified in converting the proceeding under clause (a) to a proceeding under clauses (b) and (iii) that the Tribunal erred in law in directing the Income-tax Officer to resort to the provisions of section 144-B afresh instead of annulling and/or cancelling the reassessment order without taking into consideration the provisions of section 153 of the Act. Therefore, all the three reframed questions are answered in favour of the assessee and against the Revenue.

M.BA./2371/T Order accordingly.