: Sachar, J. - This writ petition challenges the notice dated 9-3=1973 issued by Respondent No. 1, the ITO District VI(13) New Delhi, on the ground that income charge able to tax for the asst. yr. 1961-62 has escaped assessment within the meaning of s. 147(a) of the IT Act, 1961 (to be called 'the Act'). A brief reference to the facts leading to this notice by Respondent No. 1 would be helpful in appreciating the points raised. It appears that some time in September 1967some account books alleged to be duplicate books of account came to the possession of CBI which were later on made available to the IT Department. The ITO issued a notice on 25-3-1970 u/s 148 of the Act on the ground that a certain income for the asst. yr. 1961-62 had escaped assessment. In response to the notice u/s 148, a return declaring the net income of Rs. 37,591 was filed. This is the amount at which the assessed had been assessed before the said notice. On the date of hearing no one appeared on behalf of the assessed. The ITO by his order of 19-3-1974 found the assessed having had income from undisclosed sources and estimated it at Rs. 45,000. Later on, however, in response to the assessed moving an application u/s 146of the Act, the order of 19-3-1974 was cancelled and proceedings for assessment were started de novo.
2. The ITO by his order of 23-10-1975 referred to the unexplained cash credits appearing in the books and also noted that despite the opportunity given to the assessed he had failed to prove the genuineness of the accounts. He was also of the view that the duplicate books maintained by the assessed in the relevant period 1961-62 showed that the assessed had interest income which was not mentioned in the return of income. He, thereforee, added an income of Rs. 1,24,610 on account of the various unexplained cash credit and another income of Rs. 32,621 as income from interest from the duplicate books of account perused by the department. Thus, adding these two undisclosed amounts to Rs. 36,591 as filed in the return by the assessed, total income of Rs. 1,93,822 was assessed by the ITO. The assessed thereafter filed appeal before the AAC. His frontal attack was that the notice issued u/s 148 was invalid as the same had been issued without the prior permission of the Commr. As required by s. 151(2) of the Act. As the AAC found from the record that no permission had been given by the Commr. the notice issued on 25-3-1970 by the ITO u/s 148 was held to be without jurisdiction and the proceedings initiated in pursuance of it u/s 147(a) obviously had to be quashed and he did so by his order dated 10-3-1977. It is relevant to note that the AAC allowed the appeal only on the ground of lack of permission from the Commr. u/s 16(2) of the Act. It was, thereafter that the present impugned notice had been issued on 13-3-1978. The notice specifically mentions that it had been issued after the necessary satisfaction of the CBDT.
3. Sec. 146 of the Act provides a time limit for issuing notice u/s 148. Sub-cl. (i) of cl. (a) of sub-s. (1) lays down that in cases falling u/s 147(a), no notice shall be issued for the relevant asst. yr., if eight years have elapsed from the end of that year; sub-cl. (ii) of cl. (a) of sub-s. (1), however, permits a notice to be given where 8 years but not more than 16 years have elapsed from the end of that year if the income chargeable to tax which has escaped assessment amount to or is likely to amount to Rs. 50,000 or more for that year. The relevant asst. yr. being 1961-62, 16 years period expired on 31-3-1978. The notice given on 9-3-1978 is, thereforee, apparently within time. Mr. Manchanda, however, urges that s. 149(1)(a)(ii) would apply only if the income chargeable to tax which has escaped assessment amounts to more than Rs. 50,000 and his contention is that in view of the fact that in the assessment order made on 19-3-1974 income of Rs. 45,000 only was said to have escaped assessment, the present case is governed by s. 149(1)(a)(i) and the time limit would be 8 years from the end of the asst. yr. 1961-62 and the notice of 9-3-1978 is, thereforee beyond time.This argument, however, proceeds on certain assumptions not warranted by record. It is no doubt true that in the assessment order of 19-3-1974 the ITO had estimated the escaped income being from undisclosed sources at Rs. 45,000. But that order was set aside and de novo proceedings started which led to the order of the ITO on 23-10-1975 wherein the undisclosed income was found to be Rs. 1,24,610, Rs. 32,621, i.e. Rs. 1,57,231, i.e., more than Rs. 50,000. No doubt this order was set aside in appeal on 10-3-1977 but the order was set aside not on merits but on the finding that the condition precedent of obtaining the sanction of the Commr. u/s 151(2) had not been complied with. Thereafter, when the impugned notice of 13-3-1978 was to be issued by the ITO, it is obvious that he had before him the assessment order made on 23-10-1975 which showed the escaped assessable income to be more than Rs. 50,000 and would naturally treat the case u/s 149(1)(a)(ii) for which there is a 16 years time limit Mr. Manchanda, however, contends that the income assessed on 23-10-1975 had been deliberately inflated so as to confer jurisdiction on the ITO u/s 148 even beyond the period of 8 years. We find the argument unacceptable. No malice is alleged or is any suggestion that the order of 23-10-1975 was passed solely with a view subsequently to be able to invoke s. 149(1)(a)(ii) sustainable. The record shows that the notice of 25-3-1970 had already been given in time u/s 148, and but for the infirmity in not having obtained the permission of the Commr. there would have been no bar on the ITO for making a reassessment at a figure which he thought was justified. It is too tenuous an argument to suggest that the order of 23-10-1975 of the ITO arriving at a figure of escaped income of Rs. 1,57,231/- i.e.more than Rs. 50,000/- was collaterally arrived at. Evidently when the u/s 148 he would naturally take into account the assessment order of 23-10-1975 made by him and which showed that income in excess of Rs. 50,000/- had escaped assessment. The fact that on an earlier assessment on 19-3-74, it was found that an estimated income of Rs. 45,000/- had been concealed, is totally irrelevant because that assessment had been set aside and new assessment order made on 23-10-1975. Mr. Manchanda asserts that once the ITO had arrived at the figure of Rs. 45,000/- as concealed income as on 19-3-1974 (though the same had been set aside), he could not have arrived at a different figure as per order on 23-10-1975 which had found the concealed income to be more than Rs. 50,000/-. In this connection, Mr.Manchanda had urged that there was no jurisdiction with the ITO to reassess only on the ground that he was taking a different view of the matter. The argument is not available and does not apply to the facts of the present case. It is not as it the concealed income at Rs. 45,000/- held the field and the ITO was reopening the assessment on the ground of taking a different view of the matter when he was issuing the notice u/s 148. The position here is totally different. The ITO was aware of the assessment of 23-10-1975 by which concealed income came to beyond Rs. 50,000/- Obviously when on 13-3-1978 a notice was being issued the ITO correctly opined that the case was covered by the time limit of 16 years as per s. 149(1)(a)(ii).
4. Mr. Manchanda referred u/s to CIT v. Rao Thakur Narayan Singh. 1 The case is wholly distinguishable. In the case u/s 34 of the Indian IT, Act, 1922 was issued on the ground that the two items of assesseds income, namely, forest income and interest income were not included in the original assessment. The assessed, however, had originally filed a return showing the forest income. The ITO made revised assessment including both the incomes. The matter went to the Tribunal which found that the forest income had been disclosed and, thereforee, the ITO could not reopen the assessment with regard to that income. By inadvertence it set aside the whole of the reassessment including the income of interest, which was mentioned therein. The ITO did not take up the matter further in reference but sought to reopen the matter later u/s 34 of the Act on the ground that the interest income had escaped assessment. It was in that context that the Supreme Court stated that the order of the ITO had become final and that the ITO had full knowledge that the order of the Tribunal had excluded the interest income and that subsequently there was no further fact the discovery of which could alone have been relevant for the ITO to initiate reassessment proceedings. The court thereforee, held that ITO issuing an order for reassessment proceeding had no jurisdiction. In the present case the impugned notice of 13-3-1978 is not reopening the decision taken by any IT authority before; it is a notice being issued because the ITO has reason to believe that an income of Rs. 1,57,231/-has escaped assessment for the relevant asst. yr. Similarly the case referred to in Parashuram Pottery Works Co. Ltd. v. ITO is distinguishable. All that was held in that case was that if excess depreciation was allowed because of the miscalculation of the ITO, it cannot be held that the income escaped assessment because of the assesseds omission or failure to disclose all material facts as every material fact has been disclosed in the return and the assessment cannot be reopened u/s 147(a)
5. The jurisdiction to issue notice u/s 148 is now well settled by a series of decision. It is well established that the two conditions precedent to the issue of notice u/s 148 are that the ITO must have reason to believe that income chargeable to tax has escaped assessment, and secondly he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessed. Existence of these two conditions confers jurisdiction on the ITO. A duty is cast upon the preliminary facts at the time of the assessment. If the primary facts have been disclosed, the duty of the assessed is complete, and if an ITO draws an inference which subsequently turns out to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment. It is also well settled that once there exists reasonable ground for the ITO to from the above belief that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The Sufficiency of grounds which induce the ITO, thereforee, is not a justiciable issue-See : ITO, Lakhmani Mewal Das.
In the present case we have been supplied by Mr. Kirpal, the learned counsel for the Revenue, the reasons recorded by the ITO on 1-8-1977 seeking permission to issue notice. The order clearly mentions that it has come to light that the assessed was carrying on money-lending business and interest income was recorded in the duplicate books of account which were never produced before the department and came into possession of the department through the CBI. The examination of these books of account shows that for the relevant asst. yr. 1961-62 and income of Rs. 1,57,083/- had escaped assessment on account of omission to disclose the interest income of Rs. 32,473/- and cash credits aggregating to Rs. 1,24,610/-.
The belief of the ITO on material before him and as disclosed by the reasons cannot be said to illusory or dishonest as was sought to contended by Mr. Manchanda. The reasons given by the ITO for the formation of his belief have rational connection and a relevant bearing on the formation of belief and cannot be said to be in any manner non-existent. There was thus a rationale for the opinion of the ITO that concealed income was in excess of Rs. 50,000/-. As to whether on merits the assessed will be able to satisfy the ITO otherwise, are matters not relevant in any way at this stage of challenge to the issue of notice u/s 148 because that relates to the merits of the controversy which can only be decided by the income-tax authorities.
7. Mr. Manchanda had also contended that notice u/s 148 could not have been given unless the authorities had come to the conclusion that the duplicate books were of the assessed because the very jurisdiction for believing that the income had escaped assessment depended upon the finding that the duplicate books which had been made available them by the CBI were of the assessed. A reference to the order of 19-3-1974 shows that assessment proceeded on the basis that these belong to the assessed. In this order of 23-10-1975 there is a clear finding that the duplicate books of account belonged to the assessed-firm and it was thereafter that it was found that an amount of Rs. 1,57,083/- had escaped assessment. It may also be noted that the uchanti books belonged to the assessed-firm. Mr. Manchanda had sought to read more than there is in the order of the Tribunal in penalty proceeding wherein it cancelled the penalty proceedings because it took the view that onus had been discharged by the assessed under the Explanationn to s. 271(1)(c). But it is relevant to note that in very order the Tribunal had referred to its earlier finding and reiterated that the books belonged to assessed. The fact, thereforee, that the books belonged to the assessed already stands concluded by the decision of the IT authorities and there is no merit in this contention of Mr. Manchanda. We cannot, thereforee, find that the condition precedent for the issue of notice u/s 148 were not complied with.
8. The next contention of Mr. Manchanda was that without the sanction given by the Board u/s 151(1) notice was not legal. An affidavit by the IAC dated 3-9-1979 has been filed in which it is stated that on a perusal of the reason given by the ITO, the CBDT, after application of mind, was satisfied that it was a fit case for notice u/s 148 and granted requested approval. Mr. Kirpal has also made available to us the original file and on perusal of the same we find that ITO on 3-8-1977 sent his proposal for obtaining the approval for obtaining the approval of the Board to issue notice to the petitioners. The Board by its communication of 14-1-1977 referred to the letter of the ITO and sought clearance on two points, namely, the interest credit of Rs. 32,743/- and the cash credit aggregating to Rs. 1,24,610/-. This letter was replied to on 13-2-1978 in which para-wise comments to the query raised by the Board was answered. It was thereafter that the Board by its letter of 22-3-1978 returned the file with the proposal duly approved by it. It is thus clear that the reasons mentioned by the ITO were duly scrutinized with care and after applying full mind and it was thereafter that the approval was given. There is no merit in the contention that either no approval was given or that it was given without application of mind.
9. The next argument was that the ITO was not competent to issue the impugned notice of 13-3-1978 because it was the IAC alone who could issue the same, because of s. 125A(1) of the Act.
S. 125A was added to the IT Act by the Taxation Laws (Amendment) Act, 1975 w.e.f. 1-10-1075 Sub-s. (1) of s. 125A empowers the Commr. by a general or special order, to direct that all or any of the powers or functions conferred on or assigned to the ITO under the Act is exercised or performed concurrently by the IAC exercises concurrent jurisdiction with one or more ITOs in respect of any area, the ITO shall exercise the powers and perform the functions under this Act in relation thereto as the IAC may direct, and sub-s. (3) of s. 125A provides that every ITO shall observe and follow such instructions as may be issued to him for his guidance by the IAC within whose jurisdiction he performs his functions in relation to any particular proceeding or the initiation of any proceeding under this Act. Now the Income-tax Circle for the assessed is District VI(13) and by a notification of 11-a-1978 by the Commr., the IAC, Income-tax Range 2(E), has to perform the functions of IAC in respect of the said area. Another notification of the same date, i.e. 11-1-1978 has been issued u/s 125A(1) directing that the powers of the ITO, District VI(13), shall be exercised or performed concurrently by the IAC, Range 2(C) Basing himself on these notifications, Mr. Manchanda had sought to contend that because of these notifications the jurisdiction of the ITO to issue notice u/s 148 had been taken away and it was only the IAC who could issue the notice. We are unable to agree. S. 125A(1), only empowers the IAC to exercise the power to perform the functions of the ITO concurrently. This obviously cannot rule out or make nonexistent the powers conferred or assigned to the ITO under the Act including that of s. 148. All that it means is that whereas u/s 148 in the absence of a notification u/s 125A(1) only the ITO could issue notice, but by virtue of a notification u/s 125A(A) it would be open to the IAC also to do so. The effect of sub-s (1) is that by virtue of sub-s. (2), the ITOs have to exercise their powers and perform their functions as the IAC may direct. This only means that it the IAC has directed that in certain cases or kinds of cases notices u/s 148, will be given only by the IAC, the ITO will not be competent to issue notice u/s 148in those cases. In the present cases there is no allegation in the petition that any such restriction has been placed on the ITO to issue notice u/s 148 either in the case of assessed or in the kind of cases like the assessed or in the case of an assessed where the concealed income is said to be beyond Rs. 50,000. Mr. Kirpal has stated at the bar and on instructions that no such direction has been given by the concerned IAC in any way restricting the jurisdiction of ITO VI(3), to exercise his power u/s 148. In reiteration of the statement made at the bar, Mr. Kirpal has also filed an affidavit of the IAC in which he has sworn that he has not passed any order under sub-s. (2) of s. 125A and the ITO as well as IAC both had concurrent jurisdiction in matter and the ITO had jurisdiction to issue the impugned notice u/s 148. Mr. Manchandas argument seeks to assert that once a notification u/s 125A(1) is issued, the ITO concerned becomes totally incapable of doing anything under the Act even though the Act specifically authorises him to exercise that power unless he first obtains permission from the IAC. In our view such a sweeping denuding of the powers of the ITO conferred by the Act is not contemplated by the notification issued u/s 125A(1) which is only concerned with giving concurrent jurisdiction to the IAC. The meaning of concurrent jurisdiction is that both the officers have the jurisdiction in the same matter, of course, subject to that if the IAC has given any general direction, then the ITO cannot act contrary to it and must comply with it.
10. Mr. Manchanda has sought to refer to the hierarchy of officers given in Chapter XIII and stresses that every ITO has to follow and observe the instruction issued by the IAC or the Commr. This argument, however, a begs the question because if an IAC has deposed that no instructions have been issued forbidding the ITO to issue notice like the impugned one, we do not see how his power, which he undoubtedly has u/s 147(a), can be said to have been taken away. Mr. Manchanda referred to us a Circular No. 179, dt. 30-9-1975 entitled Explanatory Notes on the Taxation Laws (Amendment) Act, 1975/ Reference to that only shows that it is paraphrasing s. 125A and emphasising that IAC has concurrent jurisdiction with ITO. Nowhere in the circular does one find any such suggestion being put forward by Mr. Manchanda, namely, that once order has been passed u/s 125A, the ITO has ceased to have jurisdiction to exercise the power vested in him under the Act. There is thus no question of disobeying or going contrary to the instructions given by the IAC because in fact none has been issued.
11. This matter was heard on 31-8-1979 but it was adjourned as part heard to 5-9-1979. The matter again was adjourned because the counsel was not available. When the matter came up for hearing on 20-9-1979, Mr. Manchanda wanted to argue the point that the ITO who had issued the impugned notice was of Circle VI(13) which was not the District of the assessed and, thereforee, he had no jurisdiction to issue notice. We are afraid this is contrary to his plea. In para 16 of the writ petition, the petitioner has alleged that the case of the case of the petitioner was transferred from the Company Circle VII to ITO, District VI(13), by means of an order dated 14-11-1977. Further in paras 17 to 20 the petitioner has also alleged that subsequently on 16-12-1977 a new District VI(13) had been created and by letter dated 16-12-1978 Shri K. S. Minhas has informed the petitioner that the jurisdiction has been transferred to this District. Thus, the petitioner cases were in Company Circle and they were included in District VI(13) which was created on 16-12-1977. Mr. Manchanda, however, now seeks to urge that it had been wrongly mentioned that the ITO, District VI(13), was dealing with the cases and has referred to a notification of 14-11-1977 as item No. 41 in Annexure H where the petitioners case had been transferred from Company Circle VII to Company Circle XXIV. We are afraid this argument, which goes contrary to the pleading, cannot be allowed to be urged at the fag-end of the hearing. More so because it seems to us that it is more a case of lack of information with the petitioner about his case having been transferred to District VI(13) and that there does not seem to be any doubt in the petitioners mind that his cases have been dealt with by the ITO who has jurisdiction in the matter. We may not that District VI(13) was created on 16-12-1977 by a notification while Mr. Manchanda relies on notification 14-11-1977 and it is quite possible that after December, 1977 there is a further notification by which the petitioners cases has been transferred to Circle District VI(13). In any case, in view of the specific allegation of the petitioner himself that his case was being looked after by the ITO District VI(13) and also the petitioner had been so told specifically as far back as 1978, that it does not lie with the petitioner now to say that the jurisdiction of his case does not lie in District VI(13). No foundation has been laid for this argument which is contrary to the pleading. At this stage we are not prepared to let Mr.Manchanda urge this point. We, thereforee, overrule the point.
12. As a result we find no merit in the petitioner and the same is dismissed with costs. with