SMT. JAMILA ANSARI VS INCOME TAX DEPARTMENT
1999 P T D 534
[225 I T R 490]
[Allahabad High Court (India)]
Before Paritosh K. Mukherjee and M. C. Agarwal, JJ
Smt. JAMILA ANSARI
Versus
INCOME TAX DEPARTMENT and another
Civil Miscellaneous Writ No.530 of 1994, decided on 03/09/1996.
(a) Income-tax---
----Reassessment---Income escaping assessment ---Assessee engaged in business of export of rugs and druggets---I.T.O. allowing deduction on interest on fixed deposit receipts under S.80-HHC for assessment year 1988-89---Assessment reopened on ground that interest assessable under bead "Income from other sources" and not entitled to exemption under S.80-H"C, following decision of Tribunal for assessment year 1986-87---Not stated in reasons for reopening of assessment that receipts on which interest was earned in the year 1988-89 were the same on which interest was earned in the year 1986-87---Tribunals's finding for the year 1986-87 cannot be mechanically adopted for assessment year 1988-89---Cannot provide reason to believe for I.T.O. that for the year 1988-89 also interest was to be assessed as "income from other sources"---Assessing Officer exercising power of review under garb of reassessment---Reassessment not valid-- Indian Income Tax Act, 1961, Ss. 147 & 148.
(b) Income-tax---
----Review---I.T.O. has no power to review his order---Cannot exercise power of review in purported exercise of power under S.147, Indian Income Tax Act, 1961.
(c) Income-tax---
----Writ---High Court---Existence of alternative remedy---Not an absolute bar to exercise of writ jurisdiction by High Court in certain circumstances-- Constitution of India, Art. 226.
The assessee was doing business in the export of rugs and druggets. Under section 80-HHC of the Income Tax Act, 1961, the profits derived by the assessee from export of goods were to be excluded from the total income. For the assessment year 1988-89 for which assessment was made initially on March 16, 1989, the assessee was not allowed deduction under section 80 HHC on the interest amount of Rs.3,92,226 earned on fixed deposit receipts, following the decision of the Tribunal for the assessment year 1986-87. The Commissioner (Appeals) set aside the assessment order of the Assessing Officer and a fresh assessment was made on December 26, 1990, in which again the assessee's claim was not accepted. Subsequently, by an order dated January 30, 1991, passed under section 154 the Assessing Officer rectified the assessment at the instance of the assessee and allowed deduction of the sum of Rs.3,92,226 under section 80-HHC. Thereafter, the Assessing Officer issued notice under section 148 requiring the assessee to file a return as he had reason to believe that the assessee's income for the said year had escaped assessment. The assessee filed a revised return on December 2, 1993, declaring an income of Rs.41,370 which was declared earlier and applied to the Assessing Officer to supply to her the reasons for initiating the reassessment proceedings. The Assessing Officer, informed the assessee that the income from interest on fixed deposit receipts was assessable under the head "Income from other sources" and according to the decision of the Tribunal, was not entitled to exemption under section 80-HHC for the assessment year 1986-87, and that, therefore, the assessee's income to the tune of Rs.3,92,226 had escaped assessment. The Income-tax Officer also intimated the assessee that February 1, 1994, was fixed as the date of hearing but the Assessing Officer completed the assessment a day before,that is on January 31, 1994. On a writ petition:
Held. (i) that the information that the Assessing Officer claimed to have acquired was for the assessment year 1986-87, for which year the Tribunal had held that the income from interest on fixed deposit receipts were assessable under the head "income from other sources" and was not entitled to exemption under section 80-HHC. It was not stated in the reasons for reopening the assessment that the fixed deposit receipts on which interest was earned in the year 1988-89 were the same as those on which the interest was earned in the accounting period relevant to the assessment year 1986-87. Therefore, the Tribunal's finding on the facts relevant to the assessment year 1986-87 could not be mechanically adopted for the assessment year 1988-89 and could not provide a reason to believe that for the assessment year 1988-89 also, the interest income was to be taxed as income from other sources. The assessment orders dated March 16, 1989, and December 26, 1990, showed that the Assessing Officer had not granted deduction under section 80-HHC of the Act on the amount of interest of Rs.3,92,226. The order passed under section 154 of the Act was virtually a non-speaking order and did not show how there was a mistake apparent from the record in the assessment order. This was a patently wrong order and the remedy lay either by rectifying the same under section 154 or by invoking the Commissioner's jurisdiction under section 263 of the Act, but the Assessing Officer had adopted a queer way to exercise a power of review under the garb of a reassessment under section 147 of the Act.
(ii) That the assessment was patently illegal and was intended to prevent the assessee from challenging the notice in an appropriate forum because the assessee had filed a written reply on January 31, 1994, and had sought a month's time but the Assessing Officer, without waiting for the assessee to appear on February 1, 1994, finalised the assessment on January 31, 1994.
(iii) That though the assessee had an alternative remedy of challenging the assessment as well as the notice in an appeal preferred against the assessment under section 246 of the Act, the existence of an alternative remedy was not an absolute bar to .the exercise of jurisdiction under Article 226 of the Constitution by the High Court. In the circumstances of the case, the contention of the Revenue had to be rejected.
(iv) That, therefore, the notice issued for reopening the assessment was not valid.
Sudhir Chandra and S.D. Singh for Petitioner
Shekhar Srivastava for Respondents.
JUDGMENT
M. C. AGARWAL, J.---By this petition under Article 226 of the Constitution of India, the petitioner challenges an assessment order, dated January 31, 1994, passed under section 147 of the Income Tax Act, 1961, (hereinafter referred to as "the Act"), and a preceding notice under section 148, dated February 2, 1993.
We have heard Sri Sudhir Chandra, assisted by Sri S.D. Singh, Advocate, learned counsel for the petitioner, and Sri Shekhar Srivastava learned counsel for the respondents.
The petitioner is doing the business of export of rugs and druggets. Under section 80-HHC of the Act profits derived by an assessee from the export of goods are to be excluded from its total income. The petitioner's assessment for the assessment year 1988-89 was initially made on March 16, 1989, in which no deduction under section 80-HHC was allowed in respect of interest amounting to Rs.8,92,226 earned on fixed deposit receipts which was taken to the profit and loss account by the assessee. The Assessing Officer discussed the petitioner's claim as under:
"On a perusal of balance-sheet it shows that the assessee is having of F.D.R. of Rs.32,55,000. In spite of specific queries, the assessee has not furnished the details of interest account and as such a notice under section 143(3), dated March 9, 1989, has been given asking the assessee to furnish the details of interest account. In compliance with the assessee had filed a written reply, dated March 15, 1989, and stated that the interest received on FDR is Rs.3,92,226, while claiming the deduction under section 80-HHC the assessee has considered the interest and contended that interest on FDR is to be considered while making the claim under section 80-HHC. From the records of the assessee it is seen that in the assessment year 1986-87 a similar issue was involved and the assessee was not allowed the deduction of bank interest while calculating the claim under section 80-HHC. Against this order, the assessee went in appeal before the learned Commissioner of Income-tax (Appeals), who allowed the same, vide order, dated July, 22, 1988. This order of the learned Commissioner of Income-tax (Appeals) was not accepted by the Department and second appeal has been filed before the Hon'ble Tribunal which is still pending. In view of these circumstances, the interest on F.D.R. amounting to Rs.3,92,226 and profit on sale of premium entitlement amounting to Rs.69,464 are not treated as export profit and the assessee is not entitled for deduction under section 80-HHC on these two amounts."
The assessement was set aside on the assessee's appeal preferred to the Commissioner of Income-tax (Appeals) and a fresh assessment was made on December 26, 1990, in which again the assessee's claim was not accepted. Subsequently, by an order, dated January 30, 1991, passed under section 154 of the Act, the Assessing Officer rectified the assessment at the instance of the petitioner and allowed deduction of the aforesaid sum of Rs.3,92,226 under section 80-HHC of the Act. Thereafter, the Assessing Officer issued a notice, dated February 2, 1993, under section 148 of the Act requiring the assessee to file a return of income as he had reasons to believe that her income for the said year had escaped assessment. The petitioner filed a revised return declaring an income of Rs.41,370 that was declared earlier. This was done on December 2, 1993, and, simultaneously, she applied to the Assessing Officer to supply her the reasons for initiating the reassessment proceedings. The reasons were supplied through a letter, dated January 18, 1994, a copy of which has been annexed to the writ petition as annexure "7". The reasons for the issue of a notice under section 148 of the Act have been stated as under:
"From the perusal of `A' balance-sheet, it is evident that assessee possesses fixed deposit with bank for Rs.32,55,000 and enjoyed interest income of F.D.R's, to the tune of Rs.3,92,226. The income from interest on F.D.R. is taxable under the head 'Income from other sources' and is not entitled for exemption under section 80-HHC as has been held the Appellate Tribunal, Allahabad, in the case of the assessee for the assessment year 1986-87. Thus, I have reason to believe that the assessee's income to the tune of Rs.3,92,226 has escaped assessment. To assessee the escaped income action under section 147/148 is called for.
(Sd.) Income-tax Officer,
January 11, 1993."
In the said letter, it was intimated to the assessee that February 1, 1994, is fixed for hearing, but the Assessing Officer completed the assessment a day before, that is, on January 31, 1994, and thus, deprived the assessee of the opportunity of hearing. It is also asserted in the petition that the reasons recorded are not germane to the determination of the income for the year under consideration and, therefore, the proceedings under section 147 of the Act have not been validly initiated.
In the counter-affidavit, the respondents have contended that the sum of Rs.3,92,226 that was earned as interest on the fixed deposit receipts could not be treated as profit arising from export of goods and, therefore, by excluding the same under section 80-HHC of the Act, income to that extent had escaped assessment and that the Assessing Officer rightly initiated proceedings for reassessment. The counter affidavit is silent about the assessee's allegation that though the assessee was intimated that its case will be taken up for hearing on February 1, 1994, the assessment order was passed a day before.
Proceedings for reassessment of escaped income could be initiated under section 147 of the Act if the Assessing Officer had in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. The information that the Assessing Officer claims to have acquired was that for the assessment year 1986-87, the Income-tax Appellate Tribunal had held that income of interest from fixed deposit receipts was taxable under the head "Income from other sources" and was not entitled for exemption under section 80-HHC of the Act. It is not stated in the reasons that the fixed deposit receipts on which interest was earned in the year 1988-89 were the same on which the interest was earned in the accounting period relevant to the assessment year 1986-87. Therefore, the Tribunal's finding on the facts relevant to the assessment year 1986-87 could not be mechanically adopted for the assessment year 1988-89 could not provide a reason to believe that for the assessment year 1988-89 also, the interest income was to be taxed as income from other sources. The assessment orders, dated March 16, 1989, and December 26, 1990, show that the Assessing Officer had not granted deduction under section 80-HHC of the Act on the amount of interest, that is, Rs.3,92,226. The order passed under section 154 of the Act is virtually a non-speaking order and does not show how there was a mistake apparent from the record in the assessment order. Yet the Assessing Officer rectified the assessment by excluding Rs.3,92,226 from the taxable income under section 80-HHC of the Act. This was a patently wrong order and the remedy lay either by rectifying the same under section 154 or by invoking the Commissioner's jurisdiction under section 263 of the Act, but the Assessing Officer has adopted a queer way to exercise a power of review under the garb of a reassessment under section 147 of the Act.
It is settled law that an Income-tax Officer has no power to review his order and he could not do so in the purported exercise of the authority under section 147 of the Act. The mere fact, that for another year, the Tribunal had taken another view on the facts relating to that year, could not be a ground for having reason to believe that the same conclusions can be drawn for the year under consideration. We are, therefore, of the view that the issue of a notice under section 148 of the Act was unauthorised.
As regards the assessment, it is patently illegal and seems to be intended to prevent the assessee from challenging the notice in an appropriate forum because, as mentioned in the assessment order itself, the assessee had filed a written reply on January 31, 1994, and had sought a month's time for making arrangements and smooth conduct of the case. The Assessing Officer, therefore, indulged in gross impropriety and illegality in not waiting for the assessee to appear on February 1, 1994, and in finalising the assessment on January 31, 1994. For the above reasons, the impugned notice as well as the assessment order deserve to be quashed.
It was contended by learned counsel for the respondents that the assessee has the alternative remedy of challenging the assessment as well as the notice in an appeal preferred against the assessment under section 246 of the Act. It is true that the petitioner has such an alternative remedy, but the existence of an alternative remedy is not an absolute bar to the exercise of jurisdiction under Article 226 of the Constitution of India by a High Court. Because of the circumstances of the case, mentioned above, we are of the view that this plea of the respondents deserves to be rejected.
In the result, the writ petition is allowed costs and the impugned assessment order, dated January 31, 1994, for the assessment year 1988-89 and the notice, dated February 2, 1993, are hereby quashed.
M.B.A./1736/FCRevision allowed