2000 PLP 652 (PTD)

When the legitimacy of the action is assailed in a writ petition it is the duty of the respondents to submit an affidavit and to explain, more particularly in a matter where serious allegations regarding illegality of the action are brought in. The duty of the respondents to submit an affidavit cannot, therefore, be watered down. However, it is for the Department to support its action also by production of records disclosing the grounds for initiating the impugned action. From the order, dated March 30, 1987, it appears that notice was issued under section 147(a) of the Income-tax Act. The Income-tax Officer by his order, dated March 6, 1986, passed the following orders which read as follows: ". . . Office of the Income-tax Officer; D. Ward: Dibrugarh No.T-31 1/D/con/763, dated 6th March, 1986 To The Manging Partner, M/s. Thakursidas Banwarilal A. T. Road, Dibrugarh. Reopening of assessment for the assessment year 1982-83

Proposal regarding. Dear Sir, In the course of survey on 27-2-1985, certain documents and copies of accounts in original were impounded and kept under my custody. From the documents and copies of accounts impounded, I have found that the return of income submitted by you for the assessment year 1982-83 does not reflect the true state of affairs of your income for the assessment year 1982-83. Certain discrepancies found are noted below.

1. From the return of income submitted for the assessment year 1982-83. 1 have, found that you have shown net profit at Rs.24,724.12 including godown rent Rs.18,000 and Tinsukia land rent at Rs.17,709.35. But from the documents and copies of accounts in original impounded, I find that there was a loss of Rs.32,734.71. This loss stands after consideration of expenses of Rs.30,823.14 on account of Basa Kharcha, Rs.3,212.99 on account of Ghar Kharaeha. Rs.5,238,51 on account of officers Kharcha, Rs.135-84 on account of Shri Banwarilal Deorah, Rs.16,372.48 Banwarilal Deorah, Rs.17,662.50 Bhat Khata (Gita Bai) and Rs.15,484.05-Khisri Khata (Bai Sarita). If these excluded are expenses being non-admissible, then net profit ' of Rs.56,194.80 comes for the assessment year 1982-83 as per records impounded.

2. I have also found from the Talpat impounded that Ramdeo Ranglal is a creditor to you for Rs.1,12,028 whereas in the return of income submitted by you, you have shown Ramdeo Ranglal as a debtor for Rs.45,268.26. Since the papers impounded are original, I am relying on the original papers and I find that Ramdeo Ranglal is a creditor to you for Rs.1,12,

028. Since you have shown Ramdeo Ranglal as your debtor, a sum of Rs.1,56,296.26 (Rs.1,12,028 + Rs.45,268.26) represents your income from undisclosed sources for the assessment year 1982-83.

3. I also find that debtors and creditors appearing in the return of income submitted by you does not tally, with those appearing in the original Talpat impounded. However, before reopening the case under section 147 of the Income-tax Act, 1961, I allow you an opportunity to explain the circumstances and also to explain why assessment for the assessment year 1982-83 should not be reopened under section 147 of the Act. Your reply should reach me on or before March 17, 1986, failure of which it will be presumed that you have nothing to submit and proceedings will be started without any further communication. Yours faithfully, (Sd.) (A. R. Chakraborty), Income-lax Officer, D-Ward, Dibrugarh... " From the order sheet it thus emerges that the Income-tax Officer after verifying the original papers and documents found that the assessee had not submitted the correct statement and the assessee during the year 1982-83 showed net profit at Rs.24,724.12 including godown rent Rs.18,000 and Tinsukia land rent at Rs.17,709.35 whereas the Income-tax Officer found a loss of Rs.32,734.71. The income-tax Officer gave an opportunity vide his letter, dated March 6, 1986, to explain as to why a proceeding under section 147 of the Act should not be taken. Considering the reply of the assessee, the Income-tax Officer issued notice under section 148 of the Act. Dr. Saraf was right that the notice did not indicate as to whether the notice was issued under section 147(a) or (b) but if the factual existence can be inferred from material on record non-mentioning of the clause will not vitiate the notice. The officer duly recorded his belief relating to the omission or failure on the part of the assessee to disclose fully and truly all the material facts for the assessment year 1982-83 as income chargeable within the meaning of section 147(a) of the Act. Section 147(a) envisages two distinct conditions precedent to assume jurisdiction, (i) he must have reason to believe that income has escaped assessment and (ii) he must have reason to believe that such escape is by reason of the omission of failure on the part of the assessee to make a return and disclose fully and truly all material facts necessary for his assessment for the relevant year. These are the two essential conditions for exercising of jurisdictions under section 147(a) and if either of the conditions is absent the action of the officer will be Without jurisdiction. The principles of law are now well settled (refer to-Calcutta Discount Co. Ltd. v. ITO (1961) 41 ITR 191 (SC) and S. Narayanappa v. CIT (1967) 63 ITR 219 (SC): ITO v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC)). In Ganga Saran & Sons (P.) Ltd. v. ITO (1981) 130 ITR 1, the Supreme Court observed (page 11): "It is well-settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income-tax Officer can assume jurisdiction to issue notice under section I47(a). First, he must have reason to believe that the income of the assessee has escaped assessment and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly, all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income-tax Officer would be without jurisdiction. The important words under section 147(a) are 'has reason to believe' and these 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 facts 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." In the case in hand, the Income-tax Officer considered the circumstances and the materials on record and thereafter, assumed the jurisdiction under section 147(a)) followed by notice under section

148. After considering the materials on record, I cannot hold that there is no existence of reasonable ground before the concerned officer for exercising power under section 147(a). The other ground regarding illegality or irregularity in impounding of documents cannot vitiate the materials so far collected unless the genuineness or correctness of the same are in doubt. The Courts in India persistently refuse to exclude material evidence solely on the ground that it was obtained by illegal search or seizure. Illegal search will not invalidate the seizure of the articles. In such cases only the Court is to scrutinise the evidence carefully, refer to Radhakishan v. State of U.P. AIR 1963 SC 822; Pooran Mal v. Director of Inspection (Investigation) of Income-tax (1974) 93 ITR 505 (SC); Dr. Partap Singh v. Director of Enforcement (1985) 155 ITR 166 (SC) (175) and State of Maharashtra v. Natwarlal Damodardas Soni (1980) 4 SCC 669; AIR 1980 SC

593. On an overall consideration of all the aspects of the matter, I do not find any infirmity in the reopening of the assessment by the respondents. For the reasons stated above, the writ petition is dismissed. No. costs. The respondents may now proceed with the matter. Stay order if any stands vacated. M.B.A./3282/FC Petition dismissed