Khem Singh Sankhla v. Union Of India And Others

Prakash Tatia, J.:— Heard learned counsel for the parties.

2. The petitioner has filed the present writ petition challenging the notices (annexures 11 and 12) issued under the Income-tax Act, 1961. The brief facts of the case are that the returns of income for the assessment years 1984-85 and 1985-86 were filed on May 16, 1985, and December 19, 1985, respectively. Assessment orders were passed under section 143(1) of the Act on September 18, 1985, and January 17, 1986, respectively. On August 26, 1987, search was conducted under section 132(1) of the Act at the premises of the petitioner which went on up to August 27, 1987. During the search, statements were recorded by the concerned authorities and on December 10, 1987, order under section 132(5) of the Act was passed by the assessing authority. In this order, income for the assessment years 1984-85 and 1985-86 was computed.

3. On February 15, 1988, the respondents issued notices for the assessment years 1984-85 and 1985-86 to the petitioner, copies of which are placed on record as annexures 11 and 12. The reasons for issuance of notices are placed on record by counsel for the respondents along with reply which are annexure R/2 for the year 1984-85 and annexure R/3 for the year 1985-86. The petitioner requested to supply the reasons for reopening of assessment by submitting application on September 15, 1989, and on September 25, 1989. Thereafter, he again submitted a request on October 5, 1989, for supply of reasons for reopening of assessment. Since the said reasons were not supplied to the petitioner, therefore, it appears that the petitioner has preferred this writ petition challenging the notices on the ground that the recording of reasons for issuance of notice under section 148 of the Act is a mandatory requirement. According to learned counsel for the petitioner, the petitioner disclosed all the material facts truly and correctly. Not only this but the facts are also recorded in the composition of total income which was submitted by the petitioner as far back as in the year 1985. Not only this but the facts were also considered in the order under section 132(5) passed by the assessing authority on December 10, 1987, therefore, the very reason for issuance of notices was not in existence. According to learned counsel for the petitioner, even reasons (annexures R/2 and R/3) which were supplied along with the reply to the writ petition for issuance of notice under section 148 are absolutely void documents as they have been materially altered by the respondents by inserting new facts in the notices which were not available on the day when the reasons were alleged to have been recorded. Learned counsel for the petitioner further submits that this court directed the respondents on July 30, 1992, to keep the relevant record in court but the respondents did not choose to produce the original record even before this court. It is also submitted that on an earlier occasion, when the matter was taken up by this court, learned counsel for the petitioner submitted that the respondents have failed to produce the relevant documents despite direction, therefore, an adverse inference may be drawn against the respondents and the notices issued under section 148 by the respondents deserve to be quashed only on this ground alone.

4. Learned counsel for the petitioner pointed out that even the respondents proceeded on an absolutely wrong assumption of facts which is clear from the reasons mentioned in annexures R/2 and R/3. The notice for the year 1984-85 contains reasons that the assessee may invest/deposit Rs. 63,860 which was never disclosed to the Department; whereas the said amount in the accounts book has been shown as received by the petitioner by sale of car No. RRT-7053. Learned counsel for the petitioner submits that the respondents proceeded on the assumption that the petitioner did not disclose the investment/deposit of Rs. 5,06,700. According to learned counsel for the petitioner, the amount of Rs. 5 lakhs shown in above Rs. 5,06,700, on the face of it, it was wrongly included because of the fact that this amount of Rs. 5 lakhs has been taken by the assessing authority as of one fixed deposit; whereas in fact the F.D.R was of only Rs. 50,000 and that it was already disclosed in the return submitted in the year 1985 itself. The petitioner placed on record the copies of relevant documents including copies of the F.D.R, in support of his contention.

5. The sum and substance of the submissions of learned counsel for the petitioner is that there was no reason for issuance of notices under section 148 of the Act because of the reason that the petitioner if discloses true and correct statement of income before the assessing authority then there exists no reason for initiation of proceedings under section 148, secondly, the order recording reasons which was placed on record by the respondents along with reply to the writ petition are void documents, cannot be acted upon and cannot be said to be reasons in the eye of law as the said orders have been interpolated to alter the nature of the document by inclusion of reasons which were not in existence when the said reasons were recorded. It is also submitted that in fact even annexures R/2 and R/3 are not only void because of the above reason but in fact appear to have been prepared after issuance of notice under section 148 of the 1961 Act; therefore, also the notices under section 148 of the Act of 1961 are void and the authority has no jurisdiction to proceed with the matter.

6. Learned counsel for the respondents submitted that assessments for the years 1984-85 and 1985-86 were not reopened merely because of non-disclosure of F.D.R and receiving of a car but also due to the fact that the petitioner has spent money on the marriage of his daughter which he had not disclosed earlier. The petitioner also spent his undisclosed income in meeting his household expenses as well as in constructing the house and there were furthermore reasons. These expenditures were not disclosed when the petitioner's income was assessed and during the search these facts came to the knowledge of the Department.

7. Learned counsel for the petitioner could not dispute the fact that F.D.R which was taken into consideration of Rs. 5 lakhs while recording the reasons for reopening of assessment for the year 1985-86 was in fact the F.D.R of Rs. 50,000 only. It is also relevant to mention here that the fact with respect to the alleged investment/deposits of amount which the petitioner received by a sale of car was also disclosed on the earlier occasion and the petitioner's income was assessed after considering these amounts. So far as other reasons are concerned for holding that income of the petitioner escaped the notices because the petitioner did not disclose fully and truly all material facts are written by hand in annexures R/2 and R/3, the reasons recorded for issuance of notices under section 148 of the Act. The original record was not produced before this court despite the court's order dated July 30, 1992, and learned counsel for the petitioner relies upon the judgment of the hon'ble apex court delivered in the case of Union of India v. Raj Singh Deb Singh Bist [1973] 88 ITR 200, wherein the hon'ble Supreme Court had drawn an inference against the Department for non-production of the relevant record.

8. I perused the documents placed on record and also considered the arguments advanced by counsel for the parties. It is clear from annexure 23, F.D.R of Rs. 50,000 was treated as an F.D.R of Rs. 5 lakhs and F.D.R was purchased from the funds received from deposits of the petitioner with Lax-mandas Raghunath Parihar. The respondents in their order (annexure 9) under section 132(5) at internal page 3 gave a number of this F.D.R 249771 dated December 12, 1984, but against this mentioned Rs. 5 lakhs instead of Rs. 50,000, therefore, it appears that the respondents proceeded on the assumption that the income of Rs. 5 lakhs had not been disclosed by the petitioner or it is undisclosed income of the petitioner which is factually wrong.

9. The amount of Rs. 63,860 which was held to be income/investment, not disclosed by the petitioner for the assessment year 1984-85. This amount is of the value of car which the petitioner received from M/s. Khem Singh Pusa Ram and this was also disclosed by the petitioner in the return, copy of which is placed on record and entry is at page No. 26 of the paper book. The number of car is RRT-7053 (inadvertently it was written as truck and arrested (?) by scoring truck) but the number of the vehicle is same which is of the car and not of the truck, therefore, this amount was also well disclosed, hence, on this ground, notices under section 148 could not have been issued by the respondents. So far as the other reasons on the basis of which it is alleged that notices were issued to the petitioners are concerned, it is apparent from the copies and documents placed on record by the respondents that these additional reasons have been inserted in annexures R/2 and R/3 but it appears that these handwritten contents bear no initial of any officer. Despite an objection of the petitioner, the original record was not placed before this court, therefore, even if the documents as a whole are not treated as void documents because of material alteration and only handwritten part of annexures R/2 and R/3 which are without initials of the officer and which is alleged to have been inserted afterward only are ignored, the other reasons recorded in the said annexures R/2 and R/3 cannot be accepted as valid good reasons for issuance of notices under section 148 of the 1961 Act as these reasons are factually wrong.

10. In view of the above reasons, the writ petition is allowed. The notices annexures 11 and 12 dated February 15, 1988, are declared to be without jurisdiction and quashed.