1. M/s. Viyalakshmi Oil Industries, Mandipet, Tumkur, a registered partnership firm of partners, the petitioner before me which is engaged in the business of decorticating groundnut and manufacturing groundnut oil, is an assessee on the file of the Income-tax Officer, Tumkur (ITO).
2. For the assessment year 1978-79, relevant to the accounting year ending on March 31, 1978, the petitioner filed its return before the ITO, inter alia, disclosing the driage of groundnuts decorticated and oil produced by it. On an examination of the said return and the accounts produced by the assessee, the ITO completed his assessment on August 25, 1979 (annexure-A), under s. 143(3) of the I.T. Act of 1961 ('the Act').
3. But, on October 22, 1981, the ITO issued a notice to the petitioner under s. 148 of the Act, reopening the said assessment, the validity of which is challenged by it in this petition under article 226 of the Constitution on the ground that none of the circumstances for such reopening either under s. 147(a) or (b) of the Act did exist.
4. The respondent has produced his records and has resisted this writ petition.
5. Sri K. R. Prasad, learned counsel for the petitioner, strenuously contends that the notice issued by the ITO reopening the concluded assessment was only on a reappraisal of the material that had been produced and examined or on a mere change of opinion on the driage of groundnuts which is without jurisdiction and illegal.
6. Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, sought to justify the impugned notice.
7. The scope and ambit of ss. 147 and 148 of the Act and their corresponding provision, namely, s. 34 of the 1922 Act, has been explained by the Supreme Court in a large number of cases and it is too late in the day to refer to all of them and set out their relevant extracts also. Bearing the principles that are now well settled, it is necessary to examine whether the reason recorded by the ITO for reopening the concluded assessment is legal or not. The reasons recorded by the ITO on October 22, 1981, in the order sheet of the file reads thus :
'It is seen that the 'a' had claimed a driage of 18,142 kgs. working out to 4.04% which is found to be excessive. I am satisfied that on the failure of the 'a' to disclose fully and truly material facts necessary for assessment, income chargeable to tax amounting to Rs. 46,000 at average cost price at Rs. 2.50 per kg. for 18,142 kgs. has escaped assessment and provisions of s. 147(b) are attracted.
Issued notice under section 148.'
8. What is recorded here shows that the ITO was reopening the proceedings under s. 147(a) of the Act. When one reads these reasons in their context, it is clear that the ITO was only seeking to change his opinion on the very assessment completed against the petitioner under s. 143(3) of the Act. That an ITO cannot reopen a concluded assessment on a reappraisal of the very assessment made by him under s. 147(a) is well settled. From this, it follows that the impugned notice issued by the ITO is without jurisdiction and illegal.
9. But, Sri Srinivasan strenuously contends that in a contemporaneous 'note' recorded on the very same day, the ITO had found that he had received information as to a fact on driage under s. 147(b) of the Act and, therefore, the notice issued by him under s. 148 should be sustained as one really made under s. 147(b) of the Act as was done by me in Kousali v. Sixth Income-tax Officer [Writ Petition No. 4950 of 1978, etc., decided on 14/15-3-1984) - : 155ITR739(KAR) .
10. Sri Prasad contends that the 'Notes' written by the ITO cannot be construed as recording his reasons under s. 148(2) of the Act and cannot be relied on by this court to sustain the notice issued by the ITO.
11. In the very case file, there is a 'notes' made by the very same ITO in his own handwriting on the very same day, which reads thus :
On a scrutiny of the stock account and other details, it is seen that the true driage claimed at 18,142 kgs. is too high compared to other cases as under :
1. Ennar Industries 0.3% 2. Neelakanteswara Oil Mills 1.0% 3. P. Govindasetty & Sons 1.3%
The driage claimed by the 'a' firm works out to 4.04% and comparatively high. No reasons have been assigned for such a high percentage of driage. The assessment is therefore, reopened under section 147(b). '
12. Whether this 'notes' can be construed as the ITO recording his reasons under s. 148 of the Act which alone gives him jurisdiction to reopen the concluded assessment proceeding, is the first question that calls for my determination.
13. A 'note' or 'notes' is generally prepared by a subordinate or even by the very same officer, as in the present case, as an aide memoire or to help the memory or enable a superior officer to examine the same and pass his orders thereon. A 'note' even when the same is prepared by the very same officer and even placing the most charitable construction on the same, cannot be elevated to or treated as the ITO recording his reasons under s. 148 of the Act, which is a statutory requirement. In a proceeding under article 226 of the Constitution, this court is empowered to examine only the reasons recorded by the ITO and cannot travel beyond the reasons recorded by him. On the other hand, the acceptance of the contention urged by Sri Srinivasan calling for an examination of the 'notes' which is also fraught with grave dangers, would render the requirements of s. 148 of the Act otiose and would really convert this court into a court of appeal. On any legal principle, I cannot treat the notes prepared by the ITO as one recording his reasons as required by s. 148 of the Act.
14. In Kousali's case : 155ITR739(KAR) , on which strong reliance is placed by Sri Srinivasan, this court sustained the notice on an examination of the very reasons recorded by the ITO in that case and not on any 'notes' prepared by the ITO. But, that is not the position in the present case. Hence, the true ratio in Kousali's case : 155ITR739(KAR) does not bear on the point and assist Sri Srinivasan.
15. When once I hold that the 'notes' had to be excluded, if follows that there are no reasons recorded by the ITO to justify the reopening of the concluded assessment under s. 147(b) of the Act. From this, it follows that the notice cannot be sustained either under s. 147(a) or (b) of the Act and is liable to be quashed.
16. Sri Prasad next contends that even otherwise, the 'notes' prepared by the ITO does not also constitute an information as to a fact to justify reopening under s. 147(b) of the Act.
17. As I have held that the petitioner is entitled to succeed on the very first ground, it is not necessary for me to examine this contention and pronounce on the same.
18. In the light of my above discussion, I hold that the impugned notice is liable to be quashed. I, therefore, quash the impugned notice. But, in the circumstances of the case, I direct the parties to bear their own costs.