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Ambalal Jivabhai Patel Vs. Income-tax Officer, Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 593 of 1963
Judge
Reported in[1964]54ITR308(Guj)
ActsIncome Tax Act, 1961 - Sections 139(2), 147 and 148
AppellantAmbalal Jivabhai Patel
Respondentincome-tax Officer, Ahmedabad
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate M.M. Thakore, Adv.
Cases ReferredCalcutta Discount Co. Ltd v. Income
Excerpt:
.....in consequence of such information he should reasonably believe that income chargeable to tax has escaped assessment. this information received by the income-tax officer clearly showed that the annual value of the said immovable property taken by the income-tax officer at the time of making the original assessment was not a correct annual value and that the correct annual was higher than the figure adopted by him. we are, therefore, of the view that the intimation received by the income-tax officer from the assessor and collector of municipal taxes was information within the meaning of section 147(b) on the basis of which the income-tax officer had reason to believe that the income of the petitioner from the said immovable property had escaped assessment and the first condition of..........to believe that the income of the petitioner chargeable to tax for the assessment year 1958-59 had escaped assessment within the meaning of section 147 he proposed to reassesss the income for the said assessment year and requiring the petitioner to file a return of this income for the said assessment year within thirty days from the date of the receipt of the notice. since it was not stated in the notice as to what income was alleged by the income-tax officer to have escaped assessment and what were the grounds on which the income-tax officer had reason to believe that such escapement had taken place nor was the notice preceded by any inquiry or correspondence affording indication to the petitioner as to what were the grounds on which the income-tax officer alleged that the income of the.....
Judgment:

P.N. Bhagwati, J.

1. A short question arises on this petition, namely, whether a certain intimation received by the Income-tax Officer from the Assessor and Collector of Municipal Taxes, Municipal Corporation of Ahmedabad, could be said to constitute 'information' on which the Income-tax officer could act for the purpose of initiating proceedings for reassessment against the petitioner under section 147(b) of the Income-tax Act, 1961. The petitioner is an assessee owning an immovable property situate at Nawrangpura, Ahmedabad. In his assessment for the assessment year 1958-59 for which the corresponding previous year was the calendar year 1957, the petitioner returned a total income of Rs. 78,542, which included Rs. 3,553 under the head 'Income from property'. The amount of Rs. 3,553 was shown in the return as income from property on the basis of the retable value fixed by the Municipal Corporation under the provisions of the Bombay Provincial Municipal Corporation Act, 1949. The Income-tax Officer accepted the amount of Rs. 3,553 as representing the annual value of the said immovable property and by an order if assessment dated 31st July, 1959, assessed the total income of the petitioner at Rs. 79,612, on the basis of income under the head 'Income from property' being Rs. 3,553. The petitioner was thereafter assessed from year to year up to the assessment year 1962-63 and throughout these assessments the income from property was shown by the petitioner at Rs. 3,553 and was accepted as such by the income-tax Officer. On 27th March, 1963, however, the Income-tax Officer issued a notice to the petitioner under section 148 of the Act stating that whereas he had reason to believe that the income of the petitioner chargeable to tax for the assessment year 1958-59 had escaped assessment within the meaning of section 147 he proposed to reassesss the income for the said assessment year and requiring the petitioner to file a return of this income for the said assessment year within thirty days from the date of the receipt of the notice. Since it was not stated in the notice as to what income was alleged by the Income-tax Officer to have escaped assessment and what were the grounds on which the Income-tax Officer had reason to believe that such escapement had taken place nor was the notice preceded by any inquiry or correspondence affording indication to the petitioner as to what were the grounds on which the Income-tax Officer alleged that the income of the petitioner had escaped assessment, the petitioner addressed a letter dated 26th April, 1963, to the Income-tax Officer pointing out the aforesaid facts and contending that inasmuch as the Income-tax Officer had no materials on the basis of which he could have reason to believe that any income of the petitioner had escaped assessment the notice was illegal and void. The Income-tax Officer replied to the petitioner by his letter dated 27th April, 1963, in which he took up the stand that it was not obligatory on him to disclose the reasons for reopening the assessment and that was he was entitled to issue the notice since he had sufficient materials and reasons to reopen the assessment in the interest of proper assessment of correct according to law. The petitioner thereupon filed the present petition challenging the validity of the notice issued by the Income-tax Officer.

2. The Income-tax Officer against whom the petition was directed filed an affidavit in opposition to the petition and in the affidavit he reiterated his stand that he was not bound to intimate to the petitioner as to what part of the income of the petitioner had escaped assessment and what were the grounds which led him to believe that such income had escaped assessment. He however, proceeded to state that information in consequence of which, according to him, he has reason to believe that the income of the petitioner had escaped assessment. He pointed out that the annual value of the said immovable property was returned by the petitioner on the basis of the retable value fixed by the Municipal Corporation and the previous Income-tax Officer accepted the same believing that it represented the correct annual value of the said immovable property. In or about 1962, however, on making detailed inquiries, he came to know from the Assessor and Collector of Municipal Taxes, Ahmedabad Municipal Corporation, that though according to the principles of rating, assessment of a property should be made by the Municipal Corporation on the basis of rent that a hypothetical tenant would pay if the property is let out from year to year, the Municipal Corporation did not strictly adhere to that principle in practice and in respect of properties occupied by owners, the Municipal Corporation had made concessional assessment as compared to that principle to rented properties. He also learnt from then Assessor and Collector of Municipal Taxes that in fixing the retable value of properties occupied by owners, the Municipal Corporation did not observe any fixed ratio of concession in reference to the fair rental value. He pointed out that in consequence of this information which came in his possession from the Assessor and Collector of Municipal Taxes, he had reason to believe that the income of the petitioner from the said immovable property chargeable to tax and had escaped assessment for the assessment year 1958-59 and he, consequently, issued the impugned notice. He contended that the conditions precedent to his jurisdiction to issue the impugned notice under section 147(b) were, therefore, fulfilled and the impugned notice was a valid notice.

3. Though the main canvassed before us was that there was no information in the possession of the Income-tax Officer in consequence of which he could be said to have reason to believe that income of the petitioner had escaped assessment, a subsidiary question was also raised before us by Mr. Kaji, learned advocate appearing on behalf of the petitioners, and will examine that question first. The contention of Mr. Kaji in regard to that question was that the Income-tax Officer had not given intimation to the petitioner as to what part of the income petitioner had escaped assessment and what were the materials on the basis of which he had reason to believe that such escapement had taken place, and that the notice issued by the Income-tax officer was, therefore, illegal and void. The argument was that the Income-tax Officer was under an obligation to furnish the aforesaid information to the petitioner either before the issue of the notice or at the latest at the time of the notice and if such information was not furnished it had the effect to invalidating the notice. Now it is true that in the present case the Income-tax officer did not give any information to the petitioner as to what was the income which according to him had escaped assessment and what were the grounds on which he had reason to believe that such escapement had taken place but we do not see how that can have the effect of invalidating the notice. There is nothing in section 147 or section 148 which requires that before a notice is issued under section 148 or at the time when such notice is issued the Income-tax Officer must furnish to the assessee information as to what part of the income of the assessee has escaped assessment or as to what are the grounds on the basis of which he has reason to believe that such income has escaped assessment. The first step which the Income-tax officer is required to take under the section is to issue a notice under section 148 when he has in consequence of information in his possession reason to believe that income of the assessee chargeable to tax has escaped assessment. What the contents of the notice should be, is set out in section 148. That section says that the notice shall contain all or any of the requirements which may be included in a notice under section 139(2). There is, therefore, no statutory obligation on the Income-tax Officer to give any intimation to the assessee either before issuing the notice or at the time of issuing notice as to what part of the income of the assessee has escaped assessment or what is the information in his possession in consequence of which he has reason to believe that such escapement has taken place. Of course, ordinarily the Income-tax Officer does intimate to the assessee, and we think it is desirable practice which should in the absence of any special circumstances be followed by the department, what is the absence of any special circumstances be followed by the department, what is the information in his possession in consequent on which he has reason to believe that a particular part of the income of the assessee has escaped assessment but there is no legal obligation on him to do so. Mr. Kaji then contended that in any event the Income-tax Officer was under an obligation to supply the aforesaid information to the petitioner after the issue of the notice and since he declined to do so, the notice was invalidated. It is not necessary for us to decide in this petition whether there was any obligation on the Income-tax Officer to supply the aforesaid information to the petitioner after the issue of the notice because in fact we find that in the affidavit in reply such information has been supplied to the petitioner. Moreover, the only challenge preferred in the petition is against the validity of the notice and we do not see how any failure on the part of the Income-tax Officer to fulfill his obligation, if any, to supply information to the petitioner in regard to the aforesaid matters can have the effect of invalidating the notice. If there is an obligation on the Income-tax Officer to supply such information to the assessee and such obligation is not carried out by the Income-tax officer, the assessee may seek to enforce such obligation but the validity of the notice would not be affected. Mr. Kaji cited before us a decision of the Supreme Court in Calcutta Discount Co. Ltd v. Income-tax Officer, to show that the conditions specified in section 147(b) are conditions precedent to the exercise of jurisdiction under that sub-section but we do not see how the proposition had any bearing on the question before us. It may be that if those conditions are conditions precedent, the fulfillment of which can be tested in a court of law, the Income-tax Officer may be under an obligation to furnish information to the petitioner showing the fulfilment to those conditions before the assessee the income of the assessee, but that which the proceedings are initiated. This contention of Mr. Kaji must, therefore, be rejected.

4. Turning to the second question raised before us it was common ground between the parties that in issuing the impugned notice, the Income-tax Officer was proceedings to act under section 147(b). Now it is clear from the language of section 147(b) that assessment or reassessment of the escaped income of an assessee under that sub-section can be made by the Income-tax Officer only if the Income-tax Officer has in consequence of information in his possession reason to believe that such income has escaped assessment. Two conditions must be satisfied before the Income-tax Officer can take action under section 147(b)(i) the Income-tax Officer should receive, information after the original assessment and (2) in consequence of such information he should reasonably believe that income chargeable to tax has escaped assessment. Both these conditions were disputed by the petitioner but the question that arises in this petition is on regard to the first condition. The contention of Mr. Kaji on behalf of the petitioner was that the first conditions was not fulfilled in the present case since there was no information received by the Income-tax Officer in consequence of which he could be said to have reason to believe that any income of the petitioner chargeable to tax had escaped assessment. The information relied on by the Income-tax Officer was the intimation received by him from the Assessor and Collector of Municipal Taxes which we have already set out above. The question which, therefore, arises for determination is whether this intimation could be said to be information within the meaning of section 147(b).

5. Mr. Kaji refereed us to several decisions of various High Court in connection with this question but it is not necessary to refer to them in detail since all of them lay down the same principle, namely, that before an Income-tax Officer could act under section 34(1)(b) which was the section in the Indian Income-tax Act, 1922, corresponding to the present section 147(b), he must receive information after the original assessment and in consequence of such information he must have reason to believe that income has escaped assessment. Such information may be information as to a fact or it may even include information as to the state of the law. But a mere change of opinion on the same facts or law cannot be said to amount to such information. Most of the cases cited before us were cases where the question was debated whether what was relied upon as information by the Income-tax Officer seeking to reopen the assessment proceedings was information within the meaning of the section or was a mere change of opinion and, having regard to the facts of each particular case, the High Courts decided the matter one way or the other. These decisions cannot help us in determining whether the intimation received by the Income-tax Officer in the present case could be said to be information within the meaning of the section, since each case must turn on its own facts. The test which has to be applied is a simple test, namely, whether any information was received by the Income-tax Officer or whether what prompted the Income-tax Officer to initiate the proceedings for reassessment was a mere change of opinion.

6. Applying this test it is clear that the intimation received by the Income-tax Officer in the present case from the Assessor and Collector of Municipal Taxes was information within the meaning of section 147(b). The annual value of the immovable property belonging to the petitioner was accepted by the previous Income-tax Officer at the figure returned by the petitioner on the basis of the retable value fixed by the Municipal Corporation. Now retable value is defined by section 2(54) of the Bombay Provincial Municipal Corporation Act, 1949, to mean the value of any building or land fixed in accordance with the provisions of the Act and the Rules for the purpose of assessment to property tax. Rule 7 of the Rules in Chapter VII of the Schedule to the said Act provides that in order to fix the retable value of any building or land assessable to property tax, there shall be deducted from the amount of the annual rent for which such building or land might reasonably be expected to be let from year to year a sum equal to ten percent of. the said annual rent, and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever. It is clear from this rule that the annual value of a building for the purposes of the said Act is based on the amount of the annual rent for which the building might reasonably be excepted to be let from year to year and that is the same test which has been laid down in the Income-tax Act for determining the annual value of the property under the head 'Income from property'. The Income-tax Officer, therefore, relied on the retable value of the said immovable property fixed by the Municipal Corporation and accepted the same as correctly representing the annual value of the said immovable property for the purpose of assessment. In 1962, however, the Income-tax Officer came to learn that the retable value of properties occupied by owners was not to fixed by the Municipal Corporation on the basis set out in rule 7 but concessional assessment was made in respect of such properties. This information received by the Income-tax Officer clearly showed that the annual value of the said immovable property taken by the Income-tax Officer at the time of making the original assessment was not a correct annual value and that the correct annual was higher than the figure adopted by him. In consequence of this information received by him the Income-tax officer had, therefore, reason to believe that the income of the petitioner from the said immovable property had escaped assessment. Here there was no question of any change of opinion on the same facts or law. It is not as if on the same material which was there before the previous Income-tax Officer, the present Income-tax Officer arrived at a different opinion and, therefore, wanted to reassess the income of the petitioner. The present Income-tax officer found as a result of the information received by him that the entire basis on which the annual value of the said immovable property was arrived at by the previous Income-tax Officer was wrong inasmuch as the retable value fixed by the Municipal Corporation was not on the basis of the hypothetical rent which the said immovable property would fetch from year to year but was on a concessional basis. We are, therefore, of the view that the intimation received by the Income-tax Officer from the Assessor and Collector of Municipal Taxes was information within the meaning of section 147(b) on the basis of which the Income-tax Officer had reason to believe that the income of the petitioner from the said immovable property had escaped assessment and the first condition of section 147(b) was satisfied. The notice impugned in the present petition was accordingly a valid notice.

7. In the result the petition fails and will be dismissed with costs.

8. Petition Dismissed.


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