TAX CASES No.50 OF 1998
Statement of case under Section 33(2)(C) of the Bihar Sales Tax Act,
1959 by the Commercial Taxes Tribunal, Bihar Patna in the matter of
assessment of Sales Tax of the M/s Janta Khad Bhandar, Dauria,
West Champaran for the year 1978-79 in R.A. No. 35(Pat)/96.
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COMMISSIONER OF INCOME TAX, BIHAR, PATNA ………Appellant
Versus
M/S JANTA KHAD BHANDAR ……………… Respondent
——–
For the Appellant : ———————- Mr. Harshwardhan Pd.
Sr. Standing Counsel,
Income Tax
Mrs. Archna Sinha, Jr. Counsel
Income Tax Deptt.
For the Respondent : ———– None
P R E S E N T
THE HON’BLE MR. JUSTICE CHANDRAMAULI KUMAR PRASAD
THE HON’BLE DR. JUSTICE RAVI RANJAN
Prasad & Ranjan, JJ: This case has come up for our opinion on
a reference being made by the Patna Bench of the
Income Tax Tribunal
The assessee M/s Janta Khad Bhandar was
assessed to the income tax for the assessment year
1978-79 as association of persons by the assessing
officer under section 144/148 of the Income Taxt
Act, (hereinafter referred to as the Act). The
assessment in the case was originally made on 3rd of
March 1984 on a taxable income of Rs.7,06,430/-.
However, it was reopened on 6.4.1984 under section
146 of the Act on the basis of an application filed
by the assessee. Despite several notices, the
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assessee did not appear before the assessing officer
and the case was thereafter fixed for the last time
on 12.2.1987 but on the said date also the assessee
did not appear. The assessing officer completed the
assessment under section 144 of the Act, at the same
total income of Rs. 7,06,430/- as originally
assessed. The assessee challenged the order of
assessment in first appeal filed before the
Commissioner of Income Tax (appeal) and took as many
as ten grounds to assail the order of assessment.
However, there was no challenge to the issue of
notice under section 148 read with section 147 of
the Act nor any argument was advanced before the
Commissioner in the first appeal on the said issue.
Resultantly there is no decision by the Commissioner
in respect of the issue of reopening under section
147 (a) and notice under Section 148 of the Act.
In the second appeal filed before the
Income Tax Appellate Tribunal (hereinafter referred
to as the tribunal) on 22.9.1990 no ground was taken
challenging the issue of reopening and notice.
After filing of the appeal it was posted for
consideration on several occasions and it was for
the first time on 30th August 1995, assessee through
its counsel filed letter raising the following three
grounds;
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(1) For that the assessing officer has erred
in jurisdiction under section 147 (a) as
the condition precedent is absent in the
appellant’s case.
(2) For that the A.O. has erred in issuing
notice under section 148.
(3) For that issue of notice under section
148 is without jurisdiction and abinitio
void.
The tribunal heard the assessee and the
revenue on the aforesaid issues and relying on the
judgement of this Court in the case of Hindustan
Malleables & Forgings Ltd Versus Commissioner of
Income Tax (191 ITR 110) came to the conclusion that
the assessee is entitled to raise a point, not
raised or considered by the lower tax authorities.
The tribunal observed that there are divergent views
on the issue of entertaining a point for the first
time before the tribunal but as the Bench of the
tribunal falls within the jurisdiction of this court
the decision rendered in the case of Hindustan
Malleables & Forgings (Supra) is binding on it.
Accordingly it held that the ground urged before the
tribunal for the first time, though not raised
either before the assessing officer or the
Commissioner of appeal, is fit to be entertained for
the first time before it. On merit the Tribunal
concluded that action of reopening and notice is
4
illegal. While doing so the Tribunal observed that
sales tax assessment order does not speak of
anything about suppression of turn over by the
assessee nor there is any whisper in this regard in
the assessment order on the basis of which notice
under section 148 read with section 147 (a) could
have been issued. The tribunal held that there is
no nexus to the material possessed by the assessing
officer raising reasonable believe about the
nondisclosure of material fact by the assessee in
the statement of chargeable income. Accordingly it
held that the issue of notice under section 148 read
with section 147(a) of the Act is illegal and bad in
law. Consequently framing the assessment, pursuant
to such illegal notice is wholly illegal and void.
On these facts the tribunal has referred
the following questions for our opinion:
(i) Whether on the facts and
circumstances of the case the income
tax appellate tribunal was correct in
admitting additional ground of appeal
raised by the appellant for the first
time before it?
(ii) Whether the income tax appellate
tribunal was justified in holding
that the issue of notice under
section 148 was illegal and bad in
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law and consequentially the
assumption of jurisdiction by the
A.O. for framing assessment pursuant
to such illegal notice is wholly
illegal and void?
Mr. Harshvardhan Prasad appearing on
behalf of the Revenue submits that a ground,
neither raised before the assessing officer nor
in appeal before the Commissioner of Income Tax
can not be raised for the first time before the
tribunal. He submits that the matter stands
concluded by the judgement of Full Bench of this
Court in the case of Bihar State Road Transport
Corporation V. Commissioner of Income Tax (149
I.T.R. 208). He has drawn our attention to the
following passage:
“All these cases are a pointer
in one direction that on the facts and
in the circumstances of the case the
assessee was not entitled to raise these
new grounds as a question of law for
which the foundational facts or, for
that matter, any relevant fact were not
brought on the record either before the
ITO or before the AAC. I, therefore, am
constrained to hold that the Tribunal
was right in not allowing the additional
grounds with regard to the exemption
claimed by the assessee under s. 11 of
the Act to be raised before it”.
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Despite service of notice on the
assessee, no body has chosen to appear in its
behalf.
We have considered the submission
advanced by Mr. Prasad and we do not find any
substance in that and the authority relied on
is clearly distinguishable. We are of the
opinion that the tribunal has full jurisdiction
and it is in its discretion to entertain for the
first time new question which can be investigated
without taking further evidence. In our opinion
it is a matter within the discretion of the
tribunal. If in the opinion of the tribunal, a
ground though not raised either before the
assessing officer or in appeal before the
Commissioner is a substantial point touching
upon the merit of the case and for its
adjudication materials are available, nothing
prevents the tribunal to adjudicate and consider
a ground raised for the first time. In the case
of Bihar State Road Transport Corporation (Supra)
the Full Bench of this Court has observed as
follows:-
“Tribunal has full jurisdiction and
it is in its jurisdiction to refuse
permission to an appellant to raise for
the first time before it a new question
7of fact which cannot be investigated
without taking further evidence”.
In the facts of the said case this court held that the tribunal rightly did not allow the additional ground to be raised for the first time before it. The very fact that the
Full Bench of this Court had held that discretion
exercised by the tribunal in the facts of a given
case is correct, necessarily implies that in the
facts of a particular case the tribunal posseses
power to entertain a ground for the first time
before it. Therefore, in our opinion the
judgment of this court in the case of Bihar State
Road Transport Corporation instead of supporting
the contention of the revenue goes against him.
In view of the decision of Division
Bench of this Court in the case of Hindusthan
Malleables and Forgings Ltd. V Commissioner of
Income Tax (191 ITR 110) this question need not
detain us much. In our opinion in the scheme of
the Act there is nothing, which restricts the
tribunal to determine all question not raised
before the departmental authority . In our
opinion whether the points raised before the
tribunal for the first time is fit to be
entertained or not primarily is within its
discretion. It is not a matter of jurisdiction
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but discretion. We, hasten to add that in case in
which the point raised does not need
investigation of fact and goes to the root of the
matter, the tribunal, in the absence of any
compelling reason shall permit raising such
point. This will advance the cause of justice.
Accordingly our answer to the first
question is in the affirmative and it is held
that the tribunal was correct in admitting
additional grounds of appeal raised before it for
the first time.
Mr. Prasad, then submits that the
tribunal erred in holding that the notice issued
under section 148 of the Act is illegal. We do
not find any substance in the submission of the
learned counsel. The assessing officer has issued
notice under section 148 of the Act on the basis
of the figure obtained from the sales tax
department in the assessment order of the
assessee. A perusal of the assessment order does
not suggest suppression of turn over by the
assessee nor there is any whisper about
suppression of turn over in the said order. Thus
there was no material before the assessing
officer for issuing notice under section 148 of
the Act. It is well settled that only such
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material which has live link and proximate nexus
available with the assessing officer, may enable
him to form a reasonable believe about the
nondisclosure of the material fact by assessee
resulting in escapement of chargeable income.
We have found no nexus between them. In that
view of the matter we have no hesitation in
coming to the conclusion that the issuance of
notice was illegal.
Accordingly our answer to the second
question is also in the affirmative and it is
held that the tribunal was justified in holding
that the issue of notice under section 148 was
illegal and consequently the assumption of
jurisdiction in pursuance to such illegal notice
by assessing officer is illegal and void.
Let our opinion be transmitted to the
Income Tax Tribunal, Patna.
This reference is accordingly disposed
off.
(Chandrammauli Kr. Prasad, J)
(Dr. Ravi Ranjan, J)
Patna High Court
Dated the 24th of July 2008
Rahman/NAFR