JUDGMENT
B. C. BASAK J. – This appeal is directed against a judgment and order passed by the learned trial judge in a writ petition. The writ petition was filed by the appellant herein praying for a writ in the nature of mandamus commanding the respondents and each of them to rescind and to withdraw and/or cancel and/or forbear from giving effect to the impugned notice being annexure “D” to the petition issued under section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the said Act”). The said notice provides as follows :
“Whereas I have reason to believe that income chargeable to tax for the assessment year 1961-62 had escaped assessment within the meaning of section 147 of the Income-tax Act, 1961.
1, therefore, propose to reassess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income far the said assessment year.
2. This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal-III, Calcutta.
Sd/- Illegible,
Income-tax Officer, “G” Ward,
Companies Dt.IV, Calcutta.”
One of the contentions raised on behalf of the writ petitioner was that the condition precedent to the exercise of power under section 148 of the Act is non-existent and there was no material on the basis of which such “reason to believe” could be formed. We set out hereinbelow the relevant portions of sections 147 and 148 of the Act.
“Section 147. Income escaping assessment. – If, –
(a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for any assessment year,
he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year).
Explanation 1. – For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-
(a) where income chargeable to tax has been underassessed; or
(b) where such income has been assessed at too low a rate; or
(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922); or
(d) where excessive loss or depreciation allowance has been computed.
Explanation 2. – Production before the Income-tax Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.
Section 148. Issue of notice where income has escaped assessment. –
(1) Before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-. section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.
(2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so.”
In the affidavit-in-opposition, it was stated as follows :
“4. Before dealing with the said petition further, I set down hereunder certain facts which would be material and relevant for an effective determination of the matter in issue :
(a) In the course of the assessment for the assessment year 1963-64, it was found that the assessee-company credited in its books of account for the previous year ended on October 30, 1960, relevant to the assessment year 1961-62, hundi loans in the names of Jethanand Madhabdas, Seth Giridharidas Rughoomal and Amarlal Mulchand and two others, in all amounting to Rs. 3,10,000.
(b) Sri Mulchand Roars, proprietor of Amarlal Mulchand, made a confessional statement before the Income-tax Officer, “E” Ward, N.C.E.P. T.I., on February 4, 1966, that from 1952 till 1965 he was doing name-lending for bogus hundi loan transactions and no genuine hundi loans were advanced to any party in the name of Amarlal Mulchand during the said period.
(c) Sri Raghumal Makhia, partner of Giridharilal Raghumal, also made a confessional statement before the said Income-tax Officer on December 18, 1965, that since the starting of the partnership firm under the style of Giridharilal Raghumal on January 1, 1956, till the date of its closure of the business, the firm was completely involved in name-lending for bogus hundi transactions and that they never advanced any genuine hundi loans to any party.
(d) The aforesaid confessional statements to which reference would be made at the time of the hearing of this case for terms, scope, effect and import thereof and which the answering respondents would also like to treat as a part of this affidavit were received from the Inspecting Assistant Commissioner of Income-tax, Survey Range, Calcutta.
(e) Messrs. Jethanand Madhabdas could not be traced at the given address and it was found on an enquiry that he was never a tenant of the premises in question. I say that his assessment records show that he never
maintained any books of account and he was also engaged in bogus namelending business. The said records of the said assessee would be produced at the time of the hearing of this case for terms, scope, effect and import thereof and the answering respondents would also treat them as a part of this affidavit.
The other two parties, viz., Kishandas Giridharidas and Narain Singh Amarlal, were also not genuine hundi loan givers.
In view of the aforesaid specific information that the assessee credited its books for the assessment year 1961-62 with moneys which actually were not loans, the assessment for the company was duly reopened under section 147(a) of the Income-tax Act, 1961 (hereinafter referred to as “the said Act”), with the prior and necessary sanction and satisfaction of the Commissioner of Income-tax, West Bengal-III, Calcutta, and, accordingly, consequential notice under section 148 of the said Act dated March 30, 1970, was duly served on the assessee on March 30, 1970. In this matter, the answering respondents crave leave to produce, refer to and rely on the records as aforesaid in support of their case at the time of the hearing of this case for terms, scope, effect and import thereof and also to treat them as a part of this affidavit.
In response to the said notice, the assessee-company submitted its return showing an income of Rs. 3,516.24 along with a copy of the audited profit and loss account and balance-sheet on April 10, 1970, with a covering letter dated April 6, 1970, stating therein that the return was filed “under protest” and requested for an intimation to supply all the particulars of income which has escaped assessment. The answering respondents crave leave to produce, refer to and rely on the relevant records at the time of the hearing of this case for terms, scope, effect and import thereof and also to treat them as a part of this affidavit.
I say that the proceedings in the instant case were duly initiated and notices issued as I myself was satisfied and I had reasons to believe that the assessee, at the time of the original assessment, did not disclose fully and truly all material facts necessary for the assessment in respect of the sources of loans alleged to have been taken from bankers and that the alleged hundi loans amounting in all to Rs. 3,10,000 has escaped assessment. I say that on such opinion being formed on the basis of the statements as aforesaid, the Commissioner of Income-tax, West Bengal-III, was also duly satisfied and on receipt of his satisfaction steps were taken.”
From the records produced, it appears that the reasons which were recorded by the Income-tax Officer concerned in the report submitted for the sanction of the Commissioner of Income-tax were as follows :
“Item No. 7, that is, reasons for reopening the assessment, I have reason to believe that the assessee, at the time of the original assessment, did not disclose fully and truly all material facts necessary for the assessment in respect of the sources of loans alleged to have been taken from hundi bankers, who are well known name bankers (sic). The alleged Hundi loans amounting in all to Rs. 3,10,000 has escaped assessment.”
We have also looked into the records and this is the only reason recorded. The learned judge relied on the affidavit-in-opposition filed on behalf of the Department. We have ascertained from the records that the facts which have been stated in the affidavit do not find place in the reasons recorded by the Income-tax Officer excepting to the extent indicated above. The learned judge referred to the decision in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC), Sheq Nath Singh v. AAC of I.T. (Central) [1971] 82 ITR 147 (Cal), Chhugamal Rajpal v. S. P. Chaliha [1971] 79 ITR 603 (SC). The learned judge referred to the averment made by the Income-tax Officer in his affidavit-in-opposition and held that he was unable to accept the contention made on behalf of the petitioner. It was held that the Department had been able to show beyond doubt that these materials were before the Income-tax Officer at the time he issued the notice and in view of the categorical statement that he placed reliance before he issued the notice (sic.). It was held that the Income-tax Officer had jurisdiction to issue the notice under section 148. Regarding the question of limitation, the learned judge rejected the contention of the petitioner that as the Income-tax Officer in the present case has (sic) under clause (b) and that accordingly the period of limitation is as provided in section 149 (1) (b). The learned judge also rejected the contention made before him that there was no proper satisfaction of the Commissioner as required to be made under section 151 (2) of the Act. Accordingly, the learned judge rejected the writ petition and discharged the rule. Being aggrieved by the same, this appeal has been preferred.
In support of the appeal, it is contended before us that for the purpose of ascertaining the reason, the court can only refer to the recorded. reasons and for this purpose look into the records. However, the court cannot take into consideration the averments made in the affidavit-in-opposition filed which averments are not supported by the recorded reasons. In this connection, reliance is placed on East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal), wherein it has been stated by a Division Bench of this court as follows (at p. 344) :
“While on behalf of the appellant it was urged that the court could not rely or act on any new or fresh allegation made by the Income-tax Officer in his affidavit filed in court to uphold a proceeding for the reopening of an assessment, on the other hand, it was contended on behalf of the
respondents that the recorded reasons might be cryptic or might not contain all the reasons for the reopening and further reasons could, therefore, be disclosed in the affidavit and the court could rely thereon to judge whether the reopening of the assessment was proper or not.
Strenuous and elaborate arguments were, therefore, made before us on the question as to how far and to what extent the court could rely and act on the affidavit of the Income-tax Officer filed before the court which might not strictly conform to the reasons recorded by the Income-tax Officer under section 148 (2) of the new Act corresponding to the first portion of clause (iii) of the first proviso to section 34 of the old Act.
On behalf of the appellant, it was contended that under section 151 of the new Act corresponding to the second portion of clause (iii) of the first proviso to section 34 of the old Act, the satisfaction of the Central Board of Direct Taxes (under the old Act the CBR) or of the Commissioner had to be based only on the said recorded reasons and on no other material. The affidavit that may be filed by the Income-tax Officer before the court is not a document which had been or could be considered by the Board or by the Commissioner in according their satisfaction for initiating proceedings for the reopening of the assessment. Thus, the initiation of such proceedings or the issue of the notice, therefore, now cannot be justified or upheld on the materials or reasons or grounds disclosed in such affidavit which may be a good piece of evidence before the court but no evidence at all before the Board or the Commissioner, who had no opportunity to look into or consider such affidavit in according the satisfaction. It was urged that whenever the Supreme Court or the High Court has proceeded on the affidavit filed before it by the Income-tax Officer, there was no dispute that such affidavit was not in conformity with the recorded reasons or that any new materials or reasons or grounds which were not stated in the recorded reasons were introduced in such affidavit and, therefore, the courts proceeded on such affidavit filed by the Income-tax Officer. It was also contended that the report of the Income-tax Officer to the Board or to the Commissioner giving therein the brief reasons for taking action for reopening an assessment was not the same thing as the reasons recorded under the provisions of the statute. The recorded reasons have nevertheless to be sent to the Board or to the Commissioner for obtaining their satisfaction thereon, whether the report was sent or not by the Income-tax Officer.”
The Division Bench thereafter referred to various decisions of the Supreme Court and other High Courts and held as follows (at p. 354) :
“From the above decisions relating to the reopening of assessment either under section 34 of the Indian Income-tax Act, 1922, or under section 147 of the Income-tax Act, 1961, it appears that whenever the
Supreme Court relied on the affidavit filed by the Income-tax Officer before the court there was no controversy that the reasons given by the Income-tax Officer in such affidavit were not in conformity with or were contrary to the reasons recorded by him for reopening the assessment, and it further appears that although in those cases where the recorded reasons were not produced before the court below or before the Supreme Court, yet neither the court nor the assessee asked for production of the recorded reasons. It is true that section 148 (2) of the Income-tax Act does not say that the Income-tax Officer shall record all the reasons which he had in his mind for reopening the assessment or for formation of his belief that income of the assessee had escaped assessment or has been underassessed on account of the assessee not having made full and true disclosure of his income but the section does not also say that the Income-tax Officer would record only some of the reasons and keep the others up his sleeve to be disclosed before the court if his action is ever challenged in a court of law. The recording of reasons, in our opinion, is not an idle formality but is a mandatory requirement of the statute casting a duty and obligation on the Income-tax Officer to record his reasons for issuing a notice for reopening an assessment and the Central Board of Direct Taxes or the Commissioner, as the case may be, being satisfied that it is a fit case for issue of such notice solely on the basis of the said reasons recorded, accords its sanction to the issue of such notice.
The observations made by the Supreme Court in the case of Calcutta Discount Co. [1961] 41 ITR 191, were made with regard to the report of the Income-tax Officer to the Commissioner and not v, with regard to the recorded reasons.
In H. A. Nanji and Co. [1979] 120 ITR 593 (Cal), the Division Bench has not noticed the same.
In Chhugamal Rajpal [1971] 79 ITR 603, the Supreme Court made a clear distinction between the recorded reasons and the said report of the Income-tax Officer and observed that the order sheet recording the reasons by the Income-tax Officer as required by section 149 (2) of the Income-tax Act, 1961, was not produced before the Supreme Court but only the report submitted by him to the Commissioner was produced. The form of the report has been set out by the Supreme Court. From the wording of item No. 7 of the said form, it appears that the brief reasons for starting the proceedings for reopening mentioned therein might not be the same thing as the reasons recorded under section 1 (2) of the said Act. In item No. 7 of the said report, it is clearly stated that the Income-tax Officer has to give his brief reasons for starting proceedings under section 147 indicating the items which are believed to have escaped assessment, although it might be said, that for avoiding duplication of work, the Income-tax Officer may in certain cases annex a copy of the reasons recorded by him to the said report under item No. 7 of such report. If the Income-tax Officer gives his brief reasons in accordance with item No. 7 of the said report separately, he has nevertheless to send a copy of the reasons recorded by him for obtaining sanction under section 151 of the Act as such sanction is given not on the basis of such report but on the basis of the reasons recorded under section 148 (2) of the Act. There is no provision in the Act for such report and, as admitted by learned counsel for the respondents, the forms and the report have been improvised by the Income-tax Department for convenience. If the Income-tax Officer disclosed further or additional reasons in his affidavit before the court which are not stated in the recorded reasons such further or additional reasons would not, therefore, be before the Board or the Commissioner for their consideration for the purpose of according their sanction.
The Income-tax Act does not provide that for the issue of a notice under section 34 of the old Act or section 148 of the new Act satisfaction of the court was necessary but such satisfaction under the statute had to be that of the Board or of the Commissioner, as the case might be. Thus, if any additional reasons were disclosed by the Income-tax Officer in his affidavit before the court in support of his action in reopening the assessment on which the court might be satisfied as to the validity of the proceedings, that would not, in our opinion, validate the proceedings, if the reasons recorded under clause (iii) of the first proviso to section 34 (1) of the old Act or section 148 (2) of the new Act were not sufficient for the initiation of the proceedings or for the grant of sanction by the Board or the Commissioner, as the case might be. The Income-tax Officer, however, in his affidavit filed in court could explain or elaborate or clarify the re-sons recorded by him but could not thereby introduce new grounds or new reasons or new materials which were not to be found in the recorded reasons either expressly or by necessary implication.”
We need not refer to the decision in Jamna Lal Kabra v. ITO [1968] 69 ITR 461 (All), separately inasmuch as that was one of the decisions considered by the learned judges of the Division Bench. In that case, the Allahabad High Court held that to justify action by reference to clause (a) of section 147, it is not open to the Income-tax Officer to refer to reasons that are given pursuant to sub-section (2) of section 148. The learned judges rejected the contentions raised in the counter-affidavit of the Income-tax Officer to support the validity of the same which was completely inconsistent with the reasons recorded by the Income-tax Officer. It was held that the Income-tax Officer must be confined to clause (a) of section 147.
So far as “recorded reasons” are concerned, it was contended in support of this appeal that they are not the reasons within the meaning of section 147(a). The reasons as recorded do not entitle the Income-tax Officer concerned to reopen the case. In support of this contention, reliance is placed on a decision of the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. In that case, the reasons recorded were as follows (at p. 441) :
“There are hundi loan credits in the name of Narayansingh Nandalal, D. K. Naraindas, Bhagwandas Srichand, etc., who are known name-lenders, and also hundi loan credit in the name of Mohansingh Kanyalal, who has since confessed that he was doing only name-lending. In the original assessment, these credits were not investigated in detail. As the information regarding the bogus nature of these credits is since known, action under section 147 (a) is called for to reopen the assessment and assess these credits as the undisclosed income of the assessee. The assessee is still claiming that the credits are genuine in the assessment proceedings for 1962-63. Commissioners sanction is solicited to reopen the assessment for 1958-59, under section 147 (a).”
In that case, the notice under section 148 of the Income-tax Act, 1961, was the subject matter of an appeal to the Supreme Court from the Full Bench decision of this High Court. Two of the learned judges took the view that the conditions precedent for the exercise of jurisdiction by the Income-tax Officer under section 147 of the Income-tax Act were not fulfilled in the case as the report submitted by the Income-tax Officer to the Commissioner for sanction under section 147 (a) was defective. The defects in the report, in the opinion of the High Court, were the same as had been pointed out by this court in the case of Chhugamal Rajpal v. S. P. Chaliha [1971] 79 ITR 603 (SC). In this context, the Supreme Court observed as follows (at p. 445) :
“It would appear from the perusal of the provisions reproduced above that two conditions have to be satisfied before an Income-tax Officer acquired jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., (1) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (2) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist in order to confer jurisdiction on the Income-tax Officer. It is also
imperative for the Income-tax Officer to record his reasons before initiating proceedings as required-by section 148 (2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment year, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could, with due diligence, have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment.
The grounds or reasons which lead to the formation of the belief contemplated by section 147 (a) of the Act, must have a material bearing on the question of escarpment of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form 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 the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression reason to believe does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law (See the observations of this court in the cases of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) and S. Narayanappa v. CIT [1967] 63 ITR 219 (SC), while dealing with the corresponding provisions of the Indian Income-tax Act. 1922).”
So far as the ground mentioned in the report of the Income-tax Officer to the Commissioner of Income-tax which ground related to Mohansingh Kanyalal, the Supreme Court observed as follows (at p. 447) :
“We may now deal with the first ground mentioned in the report of the Income-tax Officer to the Commissioner of Income-tax. This ground relates to Mohansingh Kanyalal, against whose name there was an entry about the payment of Rs. 74, annas 3 as interest in the books of the assessee, having made a confession that he was doing only name-lending. There is nothing to show that the above confession related to a loan to the assessee and not to someone else, much less to the loan of Rs. 2,500 which was shown to have been advanced by that person to the assessee-respondent. There is also no indication as to when that confession was made and whether it relates to the period from April 1, 1957, to March 31, 1958, which is the subject-matter of the assessment sought to be reopened. The report was made on February 13, 1967. In the absence of the date of the alleged confession, it would not be unreasonable to assume that the confession was made a few weeks or months before the report. To infer from that confession that it relates to the period from April 1, 1957, to March 31, 1958, and that it pertains to the loan shown to have been advanced to the assessee, in our opinion, would be rather farfetched.
As stated earlier, the reasons for the formation of the belief must have a rational connection with or a relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time, we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words definite information which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening an assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.
The powers of the Income-tax Officer to reopen assessments though wide, are not plenary. The words of the statute are reason to believe and not reason to suspects. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi judicial proceedings. It is, therefore, essential that before such action is taken the requirements of law should be satisfied. The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latters failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee-respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs.”
In this matter, during the course of the argument of the learned advocate in support of the appeal, learned advocate appearing for the Department admitted that there is no Supreme Court decision, which has laid down anything contrary to the decision of the Division Bench of this court, in East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326. Accordingly, the said Division Bench decision is binding on us. We do not also see any reason to differ from the same. In our opinion, the learned trial judge erred in relying on the evidence of the Income-tax Officer concerned which contained averments which are not supported by the “recorded reasons”. In our opinion, the only document to be looked into for this purpose is the report on the basis of which sanction of the Commissioner has been obtained. In our opinion, we cannot allow the Department to rely on any other material apart from the report. Apart from anything else, this would lead to arbitrary action on the part of the Income-tax Officer. He records certain reasons for reopening and that is forwarded to the Commissioner for his sanction. The Commissioner gives his sanction on the basis of the same. If such notice is challenged and in answer to that the court relies on certain averments made in the affidavit which is not consistent with his
report, then it would give rise to a situation where the Department will be given an opportunity to rely on materials which were not before them a the time of making the order. It would also allow reopening on materials which is not sanctioned by the Commissioner. In our opinion, that would frustrate the object of the sanction, particularly, the object of obtaining the sanction of the Commissioner. Accordingly, in our opinion, it is not open to the Commissioner to support the notice under section 148 on the basis of material which does not find a place in the report. Accordingly, we accept the first contention of Mr. Pal in support of the appeal.
So far as the second contention in support of the appeal is concerned, in view of the decision of the Supreme Court ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, which we have quoted above, this must be accepted. If the reason given in the case before the Supreme Court was not sufficient for the purpose of reopening of the case, then in the present case, a fortiori the reopening is bad. This report is worse than the report before the Supreme Court. If, in that case, the report was improper and vague, then, in the present case also, it is much more vague and improper. For similar reasons given by the Supreme Court in the similar case, we uphold is contention. We hold that the reasons as recorded were not sufficient to enable the Income-tax Officer concerned to proceed to reopen the assessment as he has purported to do. It is not necessary to go into the merits of the other contentions raised in support of the appeal. The admitted position is that even if such reopening could be made not on the basis of section 147 (a) but on the basis of section 147 (b) of the Act, in view of the period of limitation, it was times-barred.
Accordingly, the appeal allowed. The writ petition is allowed. The rule is made absolute. There will be an order of mandamus restraining the respondents in the writ petition from giving any effect or further effect to the impugned notice under section 148 of the Act being annexure-D to the petition. There will be no order as to costs.
Interim order, if any, is vacated.
We place on record that after completion of the submission at the end of yesterday, we indicated that we will hear the rest of the case the next day, that is, today, and, accordingly, this matter was placed at the top of the list today. When this part-heard appeal was called on for hearing, the court waited for some time but learned advocate for the Revenue did not turn up. No junior of his, if any was present nor was any submission made. Accordingly, we have not had the opportunity of hearing the learned advocate appearing on behalf of the respondents excepting the submissions made by him during the course of submission of learned advocate for the appellant.
There will be no order as to costs.
In view of the order of the court made earlier, assessment has been completed on the basis of the impugned notice under section 148 for reopening the assessment. Obviously, in view of our final order in this appeal, no such assessment order is to be given effect to.
SATYABRATA MITRA J. – I agree.