1. In these writ petitions the order disposing of the objections filed by KLM Dutch Airlines (“the assessee” for short) to the initiation of reassessment proceedings has been challenged; a prayer has also been made for the issuance of a writ of certiorari or any like order quashing the impugned notice under section 148 of the Income-tax Act, 1961 (for short “the IT Act”) dated March 8, 2006; and for quashing the reassessment proceedings initiated in pursuance of the notice dated March 8, 2006. The assailed notice pertains to the assessment year (AY) 2001-02 in W.P (C) Nos. 16576-77 and to the assessment year 2003-04 in W.P (C) Nos. 16574-75. On a perusal of the impugned notice it appears that the Assistant Director of Income-tax (for short the Assessing Officer (AO)) intends to “reassess” the income of the petitioner/assessee inter alia since the word “assessed” has been scored out. This is noteworthy since avowedly no assessment has in fact been framed. The assessee had filed its return of income under section 139 of the Income-tax Act on October 31, 2002, for the assessment year 2002-03 declaring a “nil taxable income” and consequently seeking a refund of tax deducted/deposited. Exemption under section 90 of the Income-tax Act has been claimed in respect of income earned from “technical handling”. On January 19, 2004, a notice under section 148 of the Income-tax Act was issued in respect of the assessment year 2002-03. In response thereto the assessee filed its return of income once again declaring nil taxable income. The Assessing Officer thereupon issued a questionnaire dated March 21, 2005, inter alia, containing the following queries:
2. Why receipts from technical handling is not taxable, furnish the evidence regarding claim that receipt is covered under the Double Taxation Avoidance Agreement?
3. What is technical handling and apportioned expenses ? Furnish evidence for the amount received under technical handling and expenses incurred?
4. The assessee's case is that these queries were duly answered in terms of its letter dated March 28, 2005. The assessee thereafter received the impugned notice dated March 8, 2006, also under sections 147 and 148 of the Income-tax Act stating that the Assessing Officer had “reason to believe” that income had escaped assessment, this view having been concurred with by the Commissioner of Income-tax. The assessee again furnished its return of income though under protest and simultaneously requested for supply of the reasons recorded for issuance of the notice dated March 8, 2006. On April 10, 2006, a notice under section 143(2) of the Income-tax Act seeking further information was issued. Thereupon, the following reasons recorded on March 8, 2006, for the issuance of the notice under section 148 of the Income-tax Act were conveyed by the Assessing Officer to the assessee on July 3, 2006:
M/s. KLM Royal Dutch Airlines
Netherlands Assessment year 2002-03
Reasons for issuance of notice under section 148 of the Income-tax Act, 1961.
The assessee is a company incorporated in Netherlands. It is into the business of operation of aircraft in international business as well as rendering of technical services to other airlines. The assessee during the year under consideration has declared the income from rendering of technical services in its return of income and has claimed the same to be covered under article 8 of the double taxation Avoidance Agreement between India and Netherlands. However, no assessment for the relevant assessment year has been made under section 143(3) of the Income-tax Act, 1961. It is a settled position, in the light of the decision of the Delhi Income-tax Appellate Tribunal in the case of British Airways Plc, that income from rendering of technical services cannot be claimed as covered under article 8 of the double taxation Avoidance Agreement. Therefore, the income from rendering technical services shall be subjected to tax in India.
In view of the foregoing I have reasons to believe that income chargeable to tax has escaped assessment for the relevant assessment year within the meaning of section 147 read with section 148 of the Income-tax Act, 1961.
(Pravin Rawal) Assessing Officer
By letter dated July 24, 2006, the assessee filed objections to the initiation of reassessment proceedings. Subsequently, a letter dated October 6, 2006, was issued by the Assessing Officer to the assessee granting it a final opportunity to comply with the notice under section 142(1) by October 12, 2006, failing which the Assessing Officer would make the assessment as per the provisions of section 144 of the Income-tax Act. It is at this stage that the present writ petition has been filed.
5. In respect of the assessment year 2003-04, on February 25, 2004, the assessee suo motu filed its return of income for the assessment year 2003-04 on the same lines as in the previous year. A notice dated December 29, 2004, under section 143(2) of the Income-tax Act came to be issued to the assessee, inexplicably at the address of its chartered accountant. This was followed by a notice, dated September 16, 2005, under section 143(2) of the Income-tax Act issued yet again at the address of the chartered accountant, followed by a notice under section 142(1) of the Income-tax Act dated October 10, 2005, raising certain specific queries one amongst them being:
“Please furnish details of all foreign payments made in connection with your operations in India including payments relating to engineering and technical handling services”.
6. The assessee asseverates that a detailed reply dated February 13, 2006, had been forwarded in which the questionnaire had been duly replied to. One of the grounds taken therein was that a notice under section 142(1) had been received by the assessee on October 14, 2005; and since no action had been started under section 143(2) hence the proposed action was barred by limitation. It is at this stage that the impugned notice dated March 8, 2006, under section 148 came to be issued, which was responded to in terms of the assessee's letter dated April 7, 2006, along with the demanded return of income. The next event is the issuance of a notice under section 143(2) of the Income-tax Act, replied to by the assessee in terms of the letter dated April 17, 2006, praying inter alia for furnishing a copy of the reasons. These are identical to the “reasons” dated March 8, 2006 already extracted above. On July 24, 2006, in respect of the assessment year 2003-04 the assessee filed objections to the initiation of re-assessment proceedings which have been rejected by the impugned undated common order pertaining to both the assessment years, stated to have been received by the assessee on July 19, 2006.
7. At this stage it will be relevant to take note of two decisions of the Income-tax Appellate Authority (the ITAT) on the subject under consideration. On September 24, 2001, in the matter of British Airways Plc. v. Deputy CIT, [2002] 80 ITD 90 the Income-tax Appellate Tribunal, Delhi-A Bench, had come to the conclusion that so far as British Airways was concerned “the rendering of engineering and ground handling services to other airlines are in no way inextricably linked with the operation of the aircrafts. If for any reason the assessee stops rendering these services to the other airlines, the activity of transport of international traffic in persons and cargo will not be affected in any manner…. Thus, in the ultimate analysis, applying the analogy discussed in detail while interpreting article 8 of the double taxation Avoidance Agreement, I am fully in agreement with the finding of the authorities below that the present activity cannot be taxed under section 44BBA of the Income-tax Act, 1961”. Thereafter, on February 12, 2004, the Income-tax Appellate Tribunal, Delhi-B Bench, has decided Lufthansa German Airlines v. Deputy CIT, [2004] 90 ITD 310 and noted that as per article 8(4) of the Double Taxation Avoidance Agreement between India and Germany, the profit from the participation “in a pool” will not be taxable in India. But article 8(2) of the Double Taxation Avoidance Agreement between India and UK talks of “participation in pool of any kind by enterprises engaged in air transport”. The use of the word “pools” envisages that there could be several pools or understanding i.e more than one. Here the word “pool” does not indicate a pool which is internationally recognized. The use of the word “pools of any kind” clearly indicates that it was in the nature of commercially understood meaning. But in the international aviation industry, there is only one pool i.e IATP. Certainly, in the case of British Airways, [2002] 80 ITD 90 (Delhi) it was not a case of participation in a pool. In the appellant's case, it is participation in IATP only. This was the reason that the Income-tax Appellate Tribunal has to find out the meaning of the word “pool” in the case of British Airways Plc. Moreover, in the case of British Airways Plc, it was “pools of any kind” but in the case of the appellant, it was not a pool of any kind but only IATP. Thus, the facts in the case of British Airways Plc. were altogether different from the facts of the appellant's case and the view taken by the Income-tax Appellate Tribunal in the case of British Airways Plc. is not applicable in the case of the appellant as the facts are entirely different. We have also noted that British Airways Plc. has rendered services to Atlas Air Corporation which is not a member of IATP. The services rendered to that airline could not be bound by the IATP manual. We cannot ignore the fact that the Lufthansa, [2004] 90 ITD 310 (Delhi) decision has not been taken into consideration by the Revenue in the “reasons for issuance of notice under section 148 of the Income-tax Act, 1961 dated March 8, 2006”.
8. Mr. C.S Aggarwal, learned senior counsel for the assessee has emphasised upon the distinction between the two airlines decisions delivered by different Benches of the Income-tax Appellate Tribunal. According to him, British Airways had been extending technical handling services to entities not covered by the Double Taxation Avoidance Agreement and hence was found not to be entitled to the benefits of the Treaty, whereas this was not the position in the Lufthansa case. It was for this reason that the assessee had, in the objections filed in consonance with the ratio of GKN Drive-shafts (India) Ltd. v. ITO, [2003] 259 ITR 19 (SC), specifically relied on the Lufthansa case, which, according to the assessee, applies on all fours in its favour. We, however, shall steer clear from recording any conclusion on this aspect since it is not called for in the context of the present writ petitions. Presently, we are not concerned with the merits of the dispute; the only question is whether the pending proceedings under section 147/148 are palpably devoid of jurisdiction and hence are liable to be terminated through the exercise of the jurisdiction vested in this court under articles 226 and 227 of the Constitution of India.
9. Mr. Sanjeev Sabharwal, learned counsel for the respondent/Revenue has set out in sequential order the manner in which reassessment proceedings should be conducted. It would commence with the recording of “reasons to believe” on the basis of the information received by the Assessing Officer that income chargeable to tax has escaped assessment. It appears to us that where an assessment has not been framed at all, it is not possible to posit that income has “escaped” assessment. Notice under section 147 calling upon the assessee to file its return of income would thereupon be issued with the consequence that the assessee would have to file its return of income. Simultaneously with or immediately after the assessee makes this compliance it would be entitled to be apprised of the “reasons to believe” which had constituted the springboard for section 147/148 action. The assessee would then have the right to file objections remonstrating against the assumption of reassessment proceedings which would have to be answered by the Assessing Officer before delving further in the assessment, reassessment or the recomputation proceedings as the case may be. Mr. Sabharwal's contention that during reassessment since the Assessing Officer has to clarify the contents of the return and/or the escaped income notices under section 143(3) are to be issued within twelve months, is not free from doubt. He has not clarified as to whether this procedure can be followed without completing the relevant pending assessment.
10. In our opinion section 147/148 cannot be interpreted in isolation of the other provisions of Chapter-XIV of the Income-tax Act which is the fasciculus dealing with the procedure for assessment. Section 139 makes it mandatory for every person whose total income exceeds the maximum amount which is not chargeable to income-tax, to furnish a return of income by the due date. Section 142 deals with the inquiry before assessment. The first sub-section thereof empowers the Assessing Officer to issue a notice to any person to file a return or to produce its accounts or any documents or to provide any information as the Assessing Officer may require. Sub-section (2) empowers the Assessing Officer to make any inquiry he considers necessary. Sub-section (3) incorporates the audi alteram partem rule of natural justice viz., providing to the affected party an opportunity of being heard. Section 143 deals with the dispatch of intimations specifying the sum payable as tax or interest that has been found by the Assessing Officer to be due on the basis of the return; it deals with refunds payable to the assessee. The neat question which arises before us is whether on the commencement of assessment proceedings they must first be brought to their logical conclusion by framing an assessment before embarking on the proceedings as envisaged in section 147/148 of the Income-tax Act; or more precisely stated, can resort to section 147 be made even whilst the normal assessment proceedings are pending conclusion. To find the answer we must keep in perspective that every return of income filed under section 139 may not result in its active and in-depth perusal or consideration by the Assessing Officer as it may receive an automatic onward passage under section 143(1). However, once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Officer. The provisions of section 147 would have no role to play at this stage of the proceedings. Once a return of income attracts the attention and scrutiny of the Assessing Officer, it is his bounden duty to delve into every aspect thereof. The Assessing Officer is sufficiently empowered to ask for all information necessary for framing the assessment. The only fetter on the amplitude of his discretion is that the assessment must be framed within the time limit set-down by section 153 which, in substance, is two years from the end of the assessment year in which the income was first assessable or one year from the end of the financial year. A perusal of its second sub-section makes it clear that proceedings under section 147 are altogether-different to those under section 143. This distinction appears to have escaped the attention of the Revenue. Sub-section (2) stipulates that no order under section 147 shall be made after the expiry of one year from the end of the financial year in which notice under section 148 was served.
11. section 147 of the Income-tax Act deals with the powers of the Assessing Officer to “assess” or “reassess” the income chargeable to tax which has escaped assessment. Section 148 contemplates making the “assessment”, reassessment or recomputation under section 147. Keeping the factual matrix before us in perspective, it becomes critical to define the word assess since the Assessing Officer is avowedly not reassessing or recomputing the income presented by the assessee for taxation in the form of its return. It is trite that the words assess, reassess or recompute are not synonymous with each other. It seems to us that an assessment must entail a conscious and concerted calculation carried out by the concerned officer with a view to determine the amount of tax payable by any person. The exercise commencing with section 139 and ending at section 145A cannot be interpreted as identical to or overlapping section 147/148/149. They are predicated on different circumstances and operate in disparate dimensions. The Income-tax Act makes it incumbent upon every person whose total income exceeds the maximum amount which is not chargeable to income-tax to file a return of income in order to kick-start the normal assessment procedure. However, it may happen that a person fails to file a return of income, say for the assessment year 2000-01, even though he is liable to pay tax. It could also happen that a person may file a return of income incorrectly offering for purposes of taxation a sum lower than the correctly calculated income. Both these situations have been obviously kept in view in Explanation 2 to section 147 and in its clauses (a) and (b). In either event the Assessing Officer would invoke the powers conferred upon him by section 147 of the Income-tax Act culminating in the completion of the assessment. It is also conceivable that the incorrectness of the return may not be detected or noticed within the time period set down in section 153. In these circumstances if the Assessing Officer has reason to believe, predicated on information received by him, that income chargeable to tax has escaped assessment, he would invoke the powers under section 147. On the other hand, where a return of income has been filed but has been taken at its face value, without any proceedings under sections 143(2) and 143(3) having been conducted, no assessment exercise would obviously have been undertaken. After the expiry of the time period set down in section 153, this situation can be remedied by the Assessing Officer by invoking section 147. The word “assessment” has been defined in the Act in a most unsatisfactory manner, merely by stating that it includes reassessment. A more comprehensive definition is readily available in the Australian decision titled Batagol v. Federal Commissioner of Taxation, [1963] 109 CLR 243 in these words:
“assessment means the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case”.
12. A “clearance” or notice or intimation under section 143(1) of the Act clearly falls beyond the parameters of this definition. In Punjab Tractors Ltd. v. Joint CIT, [2002] 254 ITR 242 (P & H) it was opined that it is not necessary that assessment should have been finalised under section 143(3) before it can be “reopened” under section 147, since an intimation under section 143(1) operates as an order of assessment unless the Assessing Officer proceeds to give notice under section 143(2) and passes an order under section 143(3). This very understanding of the law has been articulated by the Division Bench of the Allahabad High Court in Pradeep Kumar Har Saran Lal v. Assessing Officer, [1998] 229 ITR 46 which, in turn, followed the view of the Calcutta High Court in jorawar Singh Baid v. CIT (Assessment), [1992] 198 ITR 47, wherein it has been observed that (page 52) : “the power that can be exercised under section 143(2) to correct the assessment made under section 143(1) does not exclude the power of the Assessing Officer to reopen the assessment under section 147 if the ingredients of section 147 are satisfied. It is open to the Assessing Officer to invoke the jurisdiction under section 147, notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under section 147 is vitiated because the Assessing Officer failed to invoke his power to correct the assessment already completed under section 143(1) by issuing a notice under section 143(2) of the Act”. However, in the present case since inquiries had been initiated under section 143(2), it became mandatory that they should have culminated in an order under section 143(3).
13. In Trustees of H.E.H the Nizam's Supplemental Family Trust v. CIT, [2000] 242 ITR 381 the apex court has observed that it is (page 387) “settled law that unless the return of income already filed is disposed of, notice for reassessment under section 148 of the Income-tax Act, 1961, cannot be issued, i.e, no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated. According to the Revenue it is immaterial whether the order is communicated or not and the only bar to the reassessment proceedings is that proceedings on the return already filed should have been terminated”. The following concluding passage from the said judgment is self-explanatory (page 390):
“A return of income filed in the form prescribed along with an application for refund under section 237 of the Act is a valid return. There is no stopping the Income-tax Officer to complete the assessment on the basis of the return so filed. It may be that the Income-tax Officer may limit the scope of examination of the return to satisfy himself regarding the correctness of the amount claimed as refund. For that purpose, he will examine if the tax paid by the assessee exceeds the amount of tax with which he is chargeable. If it is found that the income was “nil”, he will direct that refund be granted to the assessee of any amount of tax paid. That will certainly be assessment. The filing of a return in the form prescribed under section 139 of the Act along with the application for refund is not an empty formality. It assumes importance if such return had not been filed earlier. We have reproduced the note/order dated November 10, 1965, on the file pertaining to the assessment year 1963-64. In the file for the assessment year 1962-63 there is another note which is as under:
‘Please see my note in 1963-64 file. Refund to be considered in the hands of the beneficiaries’.
A mere glance at this note would show that it could not be said that the Income-tax Officer gave finality to the refund since no refund is granted either in the hands of the trust or in the hands of the beneficiaries. It is an inconclusive note where the Income-tax Officer left the matter at the stage of consideration even with regard to refund in the hands of the beneficiaries. This note was also not communicated to the trustees. When we examine the note dated November 10, 1965, on the file of 1963-64 nothing flows from that as well. In any case if it is an order, it would be appealable under section 249 of the Act. Since the period of limitation starts from the date of intimation of such an order, it is imperative that such an order be communicated to the assessee. Had the Income-tax Officer passed any final order, it would have been communicated to the assessee within a reasonable period. In any case, what we find is that the note dated November 10, 1965, is merely an internal endorsement on the file without there being an indication if the refund application has been finally rejected. By merely recording that in his opinion, no credit for tax deducted at source is to be allowed, the Income-tax Officer cannot be said to have closed the proceedings finally. The decisions referred to by the Revenue are of no help in the present case. We are, thus, of the opinion that during the pendency of the return filed under section 139 of the Act along with the refund application under section 237 of the Act, action could not have been taken under section 147/148 of the Act. Our answer to the question, therefore, is in the negative, i.e, against the Revenue.”
14. We would arrive at this very destination even if we were to traverse along a different dialectic, namely, if we were to analyse the circumstances in which section 147 of the Income-tax Act could be invoked. There is plenitude of precedents on this aspect of the law; hence only some of them shall be discussed. The question that had arisen before the Bombay High Court in Western Outdoor Interactive P. Ltd. v. A.K Phute, ITO, [2006] 286 ITR 620 was whether, upon the rectification being set aside by the Commissioner (Appeals), notice for reassessment on the same grounds could validly be initiated; there was no failure on the part of the assessee to disclose material facts and no fresh information had been received by the Assessing Officer. At best, it was possible to say that two views were available and in such a situation it was held that the said provision was not available. In particular, the Bench noted the following enunciation of the law in Indian Oil Corporation v. ITO, [1986] 159 ITR 956, 967, 970 (SC):
“The principles on this branch of law are well-settled.
To confer jurisdiction under clause (a) of section 147 of the Act beyond the period of four years but within a period of eight years from the end of the relevant year under section 148, two conditions were required to be fulfilled: the first is that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to tax had been underassessed or escaped assessment; the second is that he must have reason to believe that such escapement or underassessment was occasioned by reason, so far as relevant for the present purpose, to disclose fully and truly all material facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied. See, in this connection, the observations of this court in Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191…..
As is well-settled now by the several authorities of this court and of several High Courts, there must be materials to come to the conclusion that there was ‘omission or failure to disclose fully and truly all material facts necessary for the assessment of the year’. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, an obligation is to disclose facts; secondly, those which are material; thirdly, the disclosure must be full and fourthly, true. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, for computing or determining the proper tax due from the assessee, it is necessary to know all the facts which help the assessing authority in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as to certain other facts. But on the primary facts, it is for the taxing authority to draw inferences. It is not necessary for the assessee to draw inferences for him. See, in this connection, the observations in Calcutta Discount, [1961] 41 ITR 191 (SC)”.
15. The Full Bench of this court in Commissioner Of Income-Tax, Delhi-Ii. v. Kelvinator Of India Ltd., [2002] 256 ITR 1 had opined that the amendments introduced into section 147 with effect from April 1, 1989, have not altered the position that a mere change of opinion of the Assessing Officer was not sufficient ground for embarking on a reassessment. Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC) was duly considered and applied by the Full Bench. The Full Bench further observed that an order of assessment must be presumed to have been passed by the Assessing Officer concerned after due and proper application of mind. In these circumstances the decision of the Division Bench in Consolidated Photo and Finvest Ltd. v. CIT (Asst.), [2006] 281 ITR 394 (Delhi), inasmuch as it is irreconcilable with the views of the Full Bench, must be held not to lay down the correct law. This is especially so since the assessment proceedings had not come to an end under the first sub-section of section 143, but under the third sub-section. A Division Bench of a particular High Court is fully bound by the view preferred by a larger Bench of that court, regardless of the fact that another High Court prefers a different view (in this case that of the Gujarat High Court as in Gruh Finance Ltd. v. Joint CIT (Assessment), [2000] 243 ITR 482, Praful Chunilal Patel v. M.J Makwana, Assistant CIT, [1999] 236 ITR 832 (Guj) and Garden Silk Mills Ltd. v. Deputy CIT (Assessment) (No. 1), [1996] 222 ITR 27 (Guj)). The Full Bench of this court has taken into consideration both Praful Chunilal Patel, [1999] 236 ITR 832 (Guj) as well as Garden Silk Mills, [1996] 222 ITR 27 (Guj). In Kelvinator, [2002] 256 ITR 1 (Delhi) the Full Bench had also analysed the earlier Division Bench decisions, namely, Jindal Photo Films Ltd v. The Deputy Commissioner Of Income-Tax.), [1998] 234 ITR 170 presided over by R.C Lahoti J. (as the learned Chief Justice of India then was) and Bawa Abhai Singh v. CIT (Deputy), [2002] 253 ITR 83 comprising Arijit Pasayat and D.K Jain JJ. (as their Lordships then were). It is quite possible that had the court in Consolidated Photo, [2006] 281 ITR 394 (Delhi) been made aware of the consistent opinion of this court in Jindal Photo, [1998] 234 ITR 170 and Bawa Abhai Singh, [2002] 253 ITR 83, their conclusion may have been totally different, notwithstanding the alternative view of the Gujarat High Court.
16. It also needs to be clarified that in Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT, [2000] 246 ITR 173, the Division Bench of this court opined that an intimation under section 143(1)(a) cannot be treated to be an order of assessment. Therefore, although the assessment had been completed under section 143(1)(a), recourse could be taken to section 147. In that case while finalising the assessment for the assessment year 1996-97 under section 143 it was found that the claim of licence fee made by the assessee was erroneous and should have been disallowed.
17. The diametrically opposite position had arisen in Commissioner Of Income Tax v. Sun Engineering Works (P) Ltd., [1992] 198 ITR 297 (SC). It was held that “in the reassessment proceedings, it is not open to an assessee to seek a review of the concluded item, unconnected with the escapement of income, for the purpose of computation of the income escaping assessment; and, therefore, the Tribunal was right in holding that the respondent was not entitled to reagitate the question of the set-off of losses in the reassessment proceedings”. In other words, reassessment must invariably be preceded by conclusion of the original proceedings. The decision of the Supreme Court in Esthuri Aswathiah v. Income Tax Officer, Mysore State, [1961] 41 ITR 539; [1961] 2 SCR 911 was applied by the Division Bench of the Madras High Court in M. Ct. Muthuraman v. CIT, [1963] 50 ITR 656, in reaching the conclusion that for the assessment years 1953-54 and 1954-55 the proceedings were lawfully terminated by the remark “N.A” on the assessment file and notices under section 34 of the Indian Income-tax Act, 1922 were not invalid. With regard to the assessment years 1950-51 and 1951-52 the assessment proceedings had not been closed in any manner and as they were pending, the notices under section 34 were invalid. Finally, the notice for the assessment year 1952-53 was invalid as the notice was issued before the date on which the appeal in respect of that year was disposed of.
18. Applying this line of decisions to the facts of the present case, the inescapable conclusion that would have to be reached is that while assessment proceedings remain inchoate, no “fresh evidence or material” could possibly be unearthed. If any such material or evidence is available, there would be no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not been opened under section 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147, provided fresh material had been received by the Assessing Officer after the expiry of limitation fixed for framing the original assessment. So far as the present case is concerned we are of the view that it is evident that, faced with severe paucity of time, the Assessing Officer had attempted to travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law. Mr. Sabharwal, learned counsel for the Revenue, has also challenged the legal propriety of the present writ proceedings. We have already recorded our view on this aspect of the law in WP(C) Nos. 4997/2005, 5010/2005 and 5062 of 2005 titled Basu Distributors P. Ltd. v. ITO, [2007] 292 ITR 29 (Delhi), Ward 2(3), New Delhi decided on December 15, 2006, and we do not intend to make this judgment prolix by reproducing them. Suffice it to state that wherever and whenever it appears to the High Court that proceedings have been initiated or are continuing without the authority of the law, the High Court would be in dereliction of duty if it hesitated in exercising the extraordinary powers contained under article 226/227 of the Constitution of India. In the present case since the Assessing Officer was duty-bound to conclude the assessment before resorting to section 147 of the Income-tax Act, it is our bounden duty to issue a writ of certiorari so as to bring these legal proceedings to a definitive halt. The dicta in GKN Drive Shafts, [2003] 259 ITR 19 (SC) have been not duly followed since the objections filed by the petitioners, in our view, have been disposed of contrary to law.
19. In this analysis the writ petitions are allowed. The initiation of proceeding under section 147 of the Income-tax Act was irregular and illegal on the short ground that returns of income having been filed and since no order of assessment had been finalised by the Assessing Officer, there was no scope for invoking section 147. The pending proceedings are quashed. Since this aspect of the law has already been clarified in various decisions, the petitioner shall be entitled to costs quantified nominally at Rs. 25,000. Costs to be paid within six weeks.