Income-tax---

----Reassessment---Information that income had escaped assessment-- Amounts shown in accounts of firm as loans from minors, deposits in Banks and investments---Assessment of amount in the hands of father of minors CIT (A) confirming addition of loans but setting aside order in respect of deposit in Banks and investments on plea of father that those amounts had been assessed in the hands of minors---Order of CIT (A) constituted information within the meaning of S.147(b)---Reassessment proceedings against minors was valid---Indian Income Tax Act, 1961, S.147(b)-- Constitution of India, Art.226.

The petitioners were the minor sons of J who was a partner in S firm: While completing the assessment of J for the assessment year 1988-89, the Assessing Officer added the amounts of Rs.3,15,000 shown in the name of SKP. and Rs.1,28,459 shown in the name of NKP as loans in the books of the firm, deposits in the bank accounts and investments as shown below: "Amount pertaining to SKP: (i) Loan to firm Rs.50,000; (ii) Deposits made in the bank account Rs.1,10,000; (iii) Investments Rs.1,55,000 totalling Rs.3,15,000; Amount pertaining to NKP: (i) Loan to firm Rs.28,458; (ii) Deposits in bank account Rs.1,00,001 totalling Rs.1,28,459 (Rs.4,43,459)".

The amounts were also added in the hands of the firm as protective assessment on the ground that the onus to prove the genuineness of the loans had not been discharged by it. Both the firm and J preferred appeals against the orders. The Commissioner of Income-tax (Appeals) deleted the additions made in the hands of S firm and allowed its appeals. As regards J, he held that loans for Rs.50,000 pertaining to SKP and Rs.28,458 pertaining to N&P should be taxed in his hands on substantive basis. The addition of amount of bank deposits and other investments said to have been made by the petitioners in the business of the father, however, was set aside on the ground that the assessments of the minor sons, i.e., the petitioners, had already been completed and their investments had been accepted by the Department and the father, therefore, could not be assessed twice for the same amount. On further appeal by J to the Tribunal, the Appellate Tribunal deleted the addition of Rs.2,10,000 pertaining to the deposits allegedly made by the minor sons. In the meantime, the Assessing Officer of the petitioners decided to. reopen the assessment proceeding on being satisfied that income chargeable to tax had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961, and, accordingly, issued notices under section 148, on March 13, 1991. On writ petitions challenging the notices:

Held, dismissing the petitions, that although the sum of Rs.3,15,000 and Rs.1,28,459 had been shown in the returns of the petitioners as loans and investments to S firm and the said amounts were added in the hands of both the firm on protective basis, as well as in the hands of the father on substantive basis, the Commissioner (Appeals) confirmed the addition of the amounts of only Rs.50,000 pertaining to the petitioner SKP and Rs.28,458 pertaining to the petitioner NKP and assessed the father J for the same. The addition in the assessment of J of the amount of Rs.2,65,000 shown as bank deposits and investments in the return of SKP and Rs.1,00,001 as bank deposit in the return of NKP was set aside. The Tribunal deleted the addition of Rs.2,10,000 shown as bank deposits. It was thus, obvious that the said amount has not been subjected to assessment in the hands of the petitioners. The aforesaid deletions were made on the plea of none else than the petitioners' father that his sons, i.e., the petitioners, had been assessed for those amounts. The addition having been set aside by the appellate authority, it was obvious that they had to be treated as income in the hands of the petitioners for which there had been no assessment. The reassessment proceedings had been validity initiated.

CIT v. Simon Caves Ltd. (1976) 105 ITR 212 (SC); ITO v Purushottam Das Bangur (1997) 224 ITR 362 (SC) and Kumar Engineers v. CIT (1997) 223 ITR 18 (P&H) ref.

Binod Poddar, Biren Poddar and B.K. Jalan for Petitioners

K.K. Jhunjhunwala for Respondent

JUDGMENT

SACHCHIDANAND JHA, J.---As the dispute involved in these two writ petitions is one and the same and the .facts are also almost the same, they have been heard together and are disposed of by this common judgment.

The petitioners seek quashing of the notice under section 148 of the Income Tax Act, 1961, asking them to file return within 30 days of the notice for reassessment on the ground that income chargeable to income-tax for the assessment year 1988-89, had escaped assessment within the meaning of section 147 of the said Act. Xerox copies of the notices have been enclosed as Annexure-5 to the writ petitions.

The petitioners are the minor sons of the Jagdeo Pandey. At the relevant time, he was a partner of Sachdeva & Company, Dhanbad. While completing his assessment for the year 1988-89 on March 30, 1989, he made certain additions, as detailed below, which his Assessing Officer had tried to explain in the hands of hi,, minor sons, i.e., the petitioners herein. The amount was also added in the hands of the firm as protective assessment on the ground that the onus to prove the genuineness of the loans had not been discharged by it. The amount pertaining to Surabh Kumar. Pandey (CWJC No.2828 of 1991-R).

Both Sachdeva & Company and Jagdeo Pandey preferred appeals being Income-tax Appeals Nos.70 and 71/JSR of 1989-90 before the Commissioner of Income-tat (Appea:s), Jamshedpur. The Commissioner deleted the additions made in the hands of Sachdcva & Company and allowed its appeals. As regards Jagdeo Pandey, he held that loans of Rs.50,000 pertaining to Saurabh Kumar Pandey and Rs.28,458 pertaining to Nitish Kumar Pandey should be taxed in his hands on substantive basis. The addition of amount of bank deposits and other investments said to have been made by the petitioners in the business of the father, however, was set aside on the ground that the assessment of the minor sons, i.e., the petitioners, had already been completed and their .investments had been accepted by the Department; and the father, therefore, could not be assessed twice for the same amount. Jagdeo Pandey thereafter filed an application before the Deputy Commissioner of Income-tax, Dhanbad Range, under section 144-A of the Act, who issued certain directions to the concerned Assessing Officer. In the light of the said orders, the assessment was completed on March 27, 1991. Jagdeo Pandey again preferred appeal before the Commissioner of Income-tax (Appeals), Jamshedpur, vide Income-tax Appeal No.91/JSR of 1991-92 which was dismissed. He, thereafter. preferred further appeal before the Income-tax Appellate Tribunal, Patna Bench, vie I.T.A. No.464 (Pat) of 1992. fly order, dated June 15, 1994, the Appellate Tribunal deleted the addition of Rs.2,10,000 pertaining to the deposits allegedly made by his minor sons, i.e., the petitioner's herein, as mentioned hereinabove. These facts have been brought on record by way of supplementary affidavit.

In the meantime, after the decision of the appeals (Income-tax Appeals Nos.70 and 71/JSR of 1989-90), the Assessing Officer of the petitioners had decided to reopen the assessment proceedings on being satisfied that the income chargeable to tax had escaped assessment within the meaning of section 147 of the Act and, accordingly, had issued notices under section 148, impugned in these writ petitions on March 13, 1991.

Mr. Binod Poddar, learned counsel for the petitioners, contended that the assessment of the petitioners for the assessment year 1989-90 having been completed on the basis of the returns in which all material facts had been fully and truly disclosed under section 143(1) of the Act, there was no justification for the Assessing Officer to reopen the assessments. In support of the contention, he placed reliance on CIT v. Simon Carves Ltd. (1-976) 10 ITR 212 (SC). Mr. Poddar pointed out that from the order sheet (Annexure-4), it would appear that the Assistant Commissioner of Income tax, Dhanbad Circle, had advised the Assessing Officer (of the petitioners) to take necessary action under section 263 of the Act, vide his Letter No.824, dated July 25, 1990, but instead of taking any such action, the Assessing Officer issued notice under section 148.

The decision in the case of Simon Carves Ltd. (1976) 105 ITR 212 (SC), is of no avail to the petitioners. The facts of that case, shortly stated, were that Rule 33 of the Indian Income-tax Rules, 1922, permitted the assessment of non-resident company carrying on business as construction engineers by one of the three modes as mentioned therein. The Income-tax Officer computed the income applying one such mode, which resulted in low tax liability. Subsequently, the assessment was reopened and applying a different mode of assessment, which also was permissible, the Income-tax Officer determined higher income. The High Court held, on a reference, that this was not a case of income escaping assessment. Affirming the decision of the High Court, the Supreme Court held that Rule 33 vested discretion in the Income-tax Officer to select one of the three modes for determining the taxable income on the mere fact that the mode of computation had resulted in low tax liability. It was riot sufficient to hold that the discretion was exercised or not exercised in a proper and judicious manner specially when there was no suggestion that the Income-tax Officer was actuated by some oblique motive.

The question as to whether the petitioners made full and true disclosure of all material facts in the return is not relevant as in the present case reassessment is sought to be made on the basis of the provisions of clause (b) of section 147 and not clause (a). Section 147(b) as stood at the relevant time provided that,

If-- .

(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,

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 (hereafter in sections. 148 to 153 referred to as the relevant assessment year):"

Mr. K.K. Jhunjhunwala, learned junior standing counsel to the Income-tax Department, submitted that the basis of the proposed reassessment proceeding is the order of the Commissioner of Income-tax (Appeals) whereby the addition of Rs.2, 65,000 in the hands of Jagdeo Pandey (amount pertaining to the petitioners herein) was set aside on the plea of the father, i.e., Jagdeo Pandey, that his minor sons, i.e., the petitioners, had already been assessed with respect to the said amount and, therefore, it could not be subjected to second assessment. But, as a matter of fact, the petitioners had not been assessed with respect to those amounts. Mr. Jhunjhunwala submitted that the decision of the superior authority subsequent to the passing of the original assessment order has been held to be "information" within the meaning of section 147(b) of the Act in Kumar Engineers v. CIT (1997) 22.3 ITR 18 (P&H) and ITO v. Purushottam Das Bangur (1997) 224 ITR 362 (SC). The impugned notice under section 148 of the Act based on the information received by the Assessing Officer from the decision of the Commissioner of Income-tax (Appeals), therefore, cannot be said to be illegal or arbitrary.

I have considered tire submissions of counsel for the parties. In the fact and circumstances, I am satisfied that the case falls within the ambit of section 147(b) of the Act and the impugned notices and the proposed reassessment proceedings are not illegal. As noted above, although the sum of Rs.3,15,000 and Rs.1,28,459 had been shown in the returns of the petitioners as loans and investments to Sachdeva & Company and, the said amounts were added in the bands of both the firm on protective basis as well as in the hands of the father on substantive basis, the Commissioner (Appeals) accepted the addition of the amounts of only Rs.50,000 pertaining to the petitioner, Saurab Kumar Pandey, and Rs.28,458 pertaining to the petitioner, Nitish Kumar Pandey, and assessed him for the same. The addition of the amount of Rs.2,65,000 shown as bank deposits and investments in the returns of Saurabh Kumar Pandey and Rs.1,00,001 as bank deposit in the return of Nitish Kumar Pandey was deleted. 1t is, thus, obvious that the said amount has not been subjected to assessment in the hands of the petitioners. It is to be kept in mind that the aforesaid deletions were made on the plea of none else than the petitioners' father that his sons, i.e., the petitioners, had been assessed for those amounts. The additions having been set aside by the appellate authority, it is obvious that they have to be treated as income in the hands of the petitioners for which there has been no assessment. In these premises, I do not find any error in the impugned orders under section 147 or the notices under section 148 of the Act. As briefly indicated above, during the pendency of these writ petitions certain orders have been passed by the Commissioner of Income-tax (Appeals) as well as by the Income-tax Appellate Tribunal, Patna Bench, in the appeals preferred by the petitioners' father. If the petitioners think that the orders passed by the Commissioner/Appellate Tribunal has any bearing or of any help to them, it is open to them to take advantage of the findings in the reassessment proceedings in accordance with law.

In the result, I do not find any merit in the writ petitions, which are accordingly dismissed, but without any order as to costs.

AFTAB ALAM, J.---I agree.

M.B.A./4062/FCPetition dismissed