1. Both the Civil Rules were taken up for hearing together since it involves the similar question of fact and law.
2. In both the proceedings the legality and validity of the notice u/s 147 of the Income Tax Act proposing to assess/reassess the income for the assessment year 1985-86 in Civil Rule No. 2228/1993 and for the assessment year 1988-89 in Civil Rule No. 2227/1993 are questioned. For adjudicating the matter the facts contained in Civil Rule No. 2228/1993 is taken up for discussion.
3. For the assessment year 1985-86 the petitioner submitted his return through his father and natural guardian Shri Mahesh Kr. Saharia as on the date when the return was filed the petitioner was a minor. The assessment was duly completed by the Income Tax Officer, Ward-D. The petitioner was duly informed about the completion of assessment vide letter dated 29.2.98 and Rs. 1986/- was determined as refundable to the petitioner. After the completion of the assessment for the year 1985-86, the petitioner was served with a letter dated 9/16th March, 1993 issued by the Assistant Commissioner of Income Tax, Circle-Dibrugarh proposing to reopen the assessment for the year 1985-1986 to 1991-1992. The father and natural guardian of the petitioner Sri Mahesh Saharia informed in writing that a return of income tax in respect of the petitioner as well as a return of income in respect of M/s Anant Saharia Trust as trustee where the petitioner was the sole beneficiary was submitted. The beneficial interest of the petitioner who was the sole beneficiary in the Anant Saharia Trust was disclosed in the hand of Trust, whereas a separate return in respect of the petitioner was submitted showing the income and benefit whatsoever accrued or arose of the petitioner other than the Trust. By the above communication deduction under section SOL, 80C, 80 CCA and 80 CCB was claimed to the extent of maximum permissible limit in both cases. The respondent No. 2, therefore, informed that it had been proposed to reopen the assessment and directed the petitioner to explain as to why proceedings under section 147 of the Act should not be taken for the assessment years and further directing the father and natural guardian of the petitioner to sumit the explanation in writing on or before 22.3.93 Accordingly the father and natural guardian of the petitioner, who was minor at the relevant time, submitted a reply dated 22.3.93 to the aforesaid letter dated 9/16th March, 1993 wherein it was submitted that the specific Trust, namely, M/s Anant Saharia Trust was a separate taxable entity within the meaning of Chapter-V containing sections 60 to 65 were not applicable in the case and as such inclusion of income of the Trust in the individual return of the minor as proposed in the said letter dated 9/16th March, 1993 bears no legal sanction. It was also submitted that the petitioner who was the minor individual and the specific Trust were two different assessees and thereby permissible deduction and rebate were correctly claimed in the return. In the said letter it was submitted that in view of the above, the proposed proceedings u/s 147 of the Act should not be initiated in the case of the petitioner. The Income Tax Officer, the respondent No. 3 vide notice dated 31.3.93 issued under section 148 of the Act proposed to reassess the income of the petitioner for the assessment year 1985-1986 on the ground that he had reason to believe that the income of the petitioner for the aforesaid year i.e 1985-86 had escaped assessment within the meaning of section 147 of the Act and thereby the petitioner was directed to submit a return in the prescribed form of the petitioner for the said assessment year. Hence the writ petition.
4. The petitioner inter alia challenged the legality of the above notice as illegal and without jurisdiction inasmuch as - the condition precedent for the issue of notice u/s 148 was wholly non existent. The petitioner further contended that in the absence of any omission or failure on the part of the petitioner to disclose fully and truely all material facts necessary for assessment the Income Tax Officer did not have any reason to believe that in consequence of assesses omission and failure to disclose fully and truely all material facts necessary for assessment of any income for the year in question had escaped notice and as such the impugned notice is wholly illegal and without jurisdiction and as such the same is liable to be set aside.
5. The respondent Nos. 1 to 3 entered appearance and submitted its affidavit-in-opposition denying and disputing the claim of the petitioner.
6. The respondents stated that the father and the natural guardian of the minor (petitioner) submitted returns on behalf of the minor and the same Shri Mahesh Kumar Saharia as the Trustee of M/s Anant Saharia Trust where the said minor (petitioner) was the sole beneficiary, submitted returns on behalf of the Trust. It is relevant to mention that the whole trust was for the benefit of one person, Shri Anant Kumar Saharia and the Representative assessee for the minor and the Trust was the same person, Shri Mahesh Kumar Saharia, the father of the minor and the Trustee of the said Trust. The income as Individual and income from Trust accrued to the same person, the minor, Shri Anant Kumar Saharia, was known to the Representative assessee Shri Mahesh Kumar Saharia.
7. The respondents further submitted that the assessment for the assessment year 1988-89 in respect of the return of the income of Shri Anant Kumar Saharia submitted by Shri Mahesh Kumar Saharia, father and natural guardian of Shri Anant Kumar Saharia, submitted on 14.7.88, was completed on 21.9.88 under Section 143(1) of the Income Tax Act, 1961 and an amount of Rs. 1025/- was refunded. As per the return of income submitted by Shri Mahesh Kumar Saharia the following are the figures:
1.
INCOME FROM HOUSE PROPERTY
:
Rs. 24,608/-
2.
BANK INTEREST
:
Rs. 29/-
Rs. 24,637/-
Less: Expenses
:
Rs. 3.465/-
Rs. 21,172/-
Less: Deduction u/s 80L
:
Rs. 29/-
Rs. 21,143/-
SAY-
:
Rs. 21,140/- 174
Tax payable Rs. 785/-
8. The same, Shri Mahesh Kumar Saharia, as Trustee of the “M/s, Anant Saharia Trust” submitted return on 14.7.88 for the assessment year 1988-89 on behalf of the Trust where minor Shri Anant Kumar Saharia was the sole beneficiary, showing income as follows:
Dividend (Gross)
:
Rs. 11,027/-
Bank Interest
:
Rs. 132/-
Other Interest
:
Rs. 831/-
Rs. 11,990/-
Less: Deduction u/s SOL
:
Rs. 7.000/-
Returned Income Rs. 4,990/-
TAX PAYABLE - NIL.
9. From the above facts it is clear that Shri Mahesh Kumar Saharia was the person who submitted both the returns - on 14.7.88 as Representative Assessee for and on behalf of the same person Shri Anant Kumar Saharia, the minor and the sole beneficiary of the Trust. It was also known to him that he claimed the relief as deduction of Rs. 7,000/- u/s SOL of the I.T Act, 1961 against income from Trust and Rs. 29/- against individual income, inspite of the fact that the income arising to the person being the same such deductions are not admissible beyond maximum limit of Rs. 7,000/- u/s SOL. It was further stated that it was incumbent on the part of the representative assessee to disclose and/or mention in the return the other income or benefit from other sources of the assessee. This non-disclosure had caused escapement of assessment as the income of the beneficiary of the Trust could not be taken together with the income of the minor as individual; and also by way of claim of excessive deduction or relief in the return. As such the assessing officer issued notice to show cause as to why the assessment for the years 1985-86 to 1991-92 should not be reopened. It was also mentioned that the reply dated 22nd March, 1993, submitted by the Representative Assessee claiming the clubbing provisions of Chapter-V containing 60 to 65 were not applicable and as such the inclusion of the income of the Trust in the Individual Return of the minor had no legal sanction, was not acceptable in view of the fact that the present case being one coming under the provisions of section 160 to 167 of the Act, this is a fit case for reopening the assessment under the provisions of section 147 of the I.T Act, 1961. The respondents further stated that the Assessing Officer had reasons to believe that the income chargeable to tax had escaped assessment for the year 1988-89 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. The Assessing Officer found that because of failure to disclose fully and trully in the return of the Individual and of the ‘Trust’ that the minor Individual and the sole beneficiary is the same person, caused the escapement of assessment by way of not taking the income of the two returns together and also by way of claiming excessive deduction or reliefs in the return. It was seen by the Assessing Officer that because of the failure to disclose fully and trully all material facts the income of the Trust after deduction of Rs. 7,000/- u/s 80L came to Rs. 4990/- and the same being less than the maximum amount not chargeable to Income-tax escaped, from Taxation and the income of the said minor, as Individual came to Rs. 21,140/- after deduction of Rs. 29/- under section 80L got deduction u/s 80L more than permissible limit and also got the benefit of maximum amount of income not chargeable to Income tax twice and as a result income chargeable to Income tax escaped assessment for that assessment year.
10. In other words in the return of income submitted in the Status of Individual beneficial interest in the Trust was not disclosed in respect of the petitioner and vice-versa in the return submitted in respect of the Trust the petitioner's income other than beneficial interest in the Trust had not been disclosed.
11. Dr. A.K Saraf, learned counsel for the petitioner brought my attention to section 2(31)(i) and (vii). Dr. Saraf submitted that since in the instant case the petitioner was only a beneficiary under a Trust his case would fall under section 2(31)(vii) of the Act, Learned counsel referred to the statutory provisions of the Act to justify that the Representative assessee was within his right to submit two returns. According to the learned counsel the minor was to be assessed on two different capacities and in the instant case the provisions contained in Chapter-V of the Act clubbing the provisions of the Act were not applicable in the case. The individual income of the Trust in the individual return of the minor as proposed by the respondent was therefore unsustainable. Dr. Saraf submitted that since this matter goes in the root of the jurisdiction this court-is within its right to look to the legality of the notice and should not refuse to exercise the jurisdiction on the ground of existence of alternative remedy as pleaded by the learned counsel for the respondents. Dr. Saraf submitted that in the instant case since there was no omission for disclosing any material facts the question of exercising the jurisdiction for reopening the assessment can not therefore sustain in law.
12. Mr. G.K Joshi, learned Advocate appearing on behalf of the Revenue assisted by Mr. U. Bhuyan on the other hand submitted that in the instant case there was proven failure on the part of the Representative assessee to submit its return fully and trully all material facts necessary for the assessment. The assessee was duty bound under the law to disclose fully and trully all material facts necessary for the assessment year. Mr. Joshi further submitted that the authority at all the relevant time acted lawfully and therefore the question of interference by this Court at this stage does not arise. The power conferred under Section 147 is no doubt very wide. But at the same time it can not be stated to be a plenary power. The assumption of jurisdiction u/s 147 of the Income Tax Act therefore must be on existence of the materials before the authority. It will not depend on the mere whim or fancy of the assessing officer. The existence of the materials therefore must be real. Secondly there must be nexus between the materials as well as the belief of the escapement. The exercise must contain a definite application of mind by the assessing officer to reach at an inference based on materials justifying that the income has escaped assessment. The whole exercise u/s 147 is mainly based on facts that there must be one assessment and one assessment alone on the income and therefore each assessment year is independent by itself. In the instant case the Assessing Officer on taking note of the return thought it fit to re-open the assessment on the ground of alleged failure to submit its return by disclosing fully and truly all material facts necessary for assessment. The belief is that of the Assessing Officer and the reliability or credibility or for that matter the weight that was attached on the materials naturally depend on the judgment of the Assessing Officer. This Court in exercise of power under Article 226 of the Constitution of India can not go into the sufficiency or adequacy of the materials. After all the Assessing Officer alone is entrusted to administer the impugned act and if there is prima facie material at the disposal of the Assessing Officer that the income chargeable to income tax escaped assessment this court in exercise of power under Article 226 of the Constitution of India should refrain from exercising the power. In the instant case the case of the petitioner was fairly considered and thereafter the above decision is taken.
13. For the foregoing reasons both the writ petitions stand dismissed. There shall be no order as to costs.