JUDGMENT
V. C. Daga, J.
1. The present petitioner, the Comunidade of
Chicalim, filed this petition to challenge Notice issued
under Section 148 of the Income Tax Act, 1961, (the “IT
Act” for short), dated 18th March, 1991, bearing No.
O.21/W1 (Annexure P. 4) and by an interim order further
proceedings pursuant to the Notice were stayed.
FACTS IN BRIEF
2. The Income Tax Officer, Ward No. I, Margao,
Goa, has issued the above Notice on the grounds that he
has a reason to believe that the petitioners income in
the status of body of individuals (BOI) chargeable to tax
for the Assessment Year 1986-1987, has escaped
assessment, within the meaning of Section 147 of the IT
Act and that, therefore, he proposes to re-assess the
petitioners income for the said Assessment Year. He has
required the petitioner to deliver to him a return in the
prescribed form, of the petitioners income for the said
Assessment Year 1986-1987.
3. The petitioner, after receipt of the
aforesaid Notice under Section 148 of the IT Act, by
letter dated 19th April, 1991, called upon the respondent
no.1, Income Tax Officer, to disclose the reasons, if
any, recorded by him before issuing Notice dated 18th
March, 1991, proposing to re-open his assessment. The
respondent no. 1 did not care to communicate reasons for
the proposed re-opening, with the result, the petitioner,
was required to approach this Court. The petitioner in
the petition has contended that Notice has been issued by
the Income Tax Officer, Ward I, Margao, Goa, without
recording reasons and also without complying with the
mandatory basic requirements of Section 147 of the IT
Act. As such the action complained of is without
authority of law.
4. On being noticed, the respondents appeared
and filed their affidavit in reply, making bald averment
therein to the effect that specific reasons for adopting
the status of BOI as against AOP are recorded in the
order sheet. However, no copy of the order sheet has
been produced alongwith the affidavit in reply. No
reasons for issuing Notice under Section 148 of the IT
Act are to be found in the counter-affidavit. No copy of
the reasons alleged to have been recorded is produced on
record, inspite of specific assertion made in the
petition that no such reasons existed, and/or no reasons
were recorded before directing Notice under Section 148
of the IT Act. Apart from the stray averments in the
affidavit in reply, no other material has been placed on
record in support of Notice under Section 148 of the IT
Act.
SUBMISSIONS
5. The learned counsel for the petitioner
contended that the Income Tax Officer had no material
before him for entertaining belief that income chargeable
to tax has escaped to be assessed. In the submission of
the petitioner two conditions precedent are required to
be fulfilled before the Income Tax Officer can exercise
jurisdiction under Clause (a) of Section 147 of the IT
Act. These conditions are:-
(i) He must have reason to believe
that the income has escaped assessment; and
(ii) that such escapement is by reason
of the omission or failure on the part of
the assessee to make a return or to
disclose fully and truly all material facts
necessary for his assessment for the
relevant year.”
The petitioner further submitted that if the existence of
these facts is challenged by the assessee before the High
Court, it is for the Income Tax Officer to satisfy the
Court about the existence of the same by filing an
affidavit and producing relevant record. Apart from
this, there is nothing in the counter-affidavit filed by
the Revenue to suggest that there was failure on the part
of the assessee to make a return or to disclose fully and
truly all material facts necessary for relevant
Assessment Year 1986-1987. No indication in this behalf
is to be found in the affidavit-in-reply. No such case
has been made out by the respondents in their
counter-affidavit and/or return. The learned counsel for
the petitioner thus contended that the first respondent
acted beyond jurisdiction conferred on him and Notice
under Section 148 of the IT Act is liable to be quashed
and set aside.
6. The learned counsel appearing for the
petitioner relied on the judgment of the Supreme Court in
the case of Madhya Pradesh Industries Ltd. vs.
Income-Tax Officer, Special Investigation Circle B,
Nagpur, (1965) 56 ITR 637 and submitted that there is no
counter-affidavit filed, as such this Court has to accept
the allegations made in the petition and quash the notice
which is challenged in the petition. The learned counsel
for the petitioner also relied on the judgment of the
Division Bench of this Court in the case of Devji Rajvi
Patel vs. Balasubramaniam & Ors., 210 (1994) 925, in
support of his contention.
7. The learned counsel appearing for the
respondents, when called upon to justify the defence,
prayed for adjournment so as to produce relevant material
before this Court. As a matter of fact, affidavit in
reply has been filed on record in the month of June,
2001. It was open for the respondents to produce
relevant material alongwith their affidavit. We do not
approve this method of producing documents across the
Bar. Ample opportunity and time was available to the
respondents to produce adequate and relevant material in
support of their defence as the petition is pending since
1991. This petition was dismissed by this Court in
limine by Order dated 19th November, 1991. The matter
was carried to the Apex Court in Civil Appeal No. 7314 of
1996. The order of of this Court dismissing the petition
in limine, came to be set aside in appeal by Order dated
28th July, 2000. While disposing of the Appeal, the Apex
Court specifically directed that the Writ Petition should
be decided expeditiously. That is how, today this
petition was placed before us for final hearing. This
petition came up for final hearing on the second occasion
in last 11 years. Thus, considering the pendency of the
petition since 1991 and the directions issued by the Apex
Court to hear this petition expeditiously, adjournment
sought was refused and accordingly we proceeded to hear
this matter.
8. Per contra, learned counsel for the Revenue
in the above circumstances relied on the
counter-affidavit and tried to justify the action of the
Income-Tax Officer on merits. Alternatively, he
submitted that alternate remedy by way of appeal being
available to the petitioner, this Court should not
exercise writ jurisdiction under Article 226 of the
Constitution of India.
CONSIDERATIONS
9. The petitioner, in this petition,
specifically challenged the existence of the conditions
precedent for issuance of the Notice under Section 148 of
the IT Act. The law is well-settled on this point that
if existence of the conditions precedent for issuance of
Notice under Section 148 of the IT Act is challenged by
the assessee before the Court on oath, it is for the
Income-Tax Officer to satisfy the Court about the
existence of the conditions precedent by filing affidavit
and/or producing relevant records. If on consideration
of the said material, the Court is satisfied that the
conditions precedent did exist at the time the Notice was
issued, the challenge may be turned down by the Court.
In the absence of any material whatsoever placed by the
Income-Tax Officer to disprove the challenge of the
assessee to the existence of the conditions precedent,
the Writ Petition cannot be dismissed. Reference may be
made in this connection to the decision of the Supreme
Court in the case of Madhya Pradesh Industries Ltd.
(cited supra). that was a case under Section 34 of the
Indian Income-Tax Act 1922 (corresponding to Section 148
of the IT Act). The Notice was challenged by the
assessee before the High Court by filing writ petition.
The High Court dismissed the Writ Petition in limine.
The Apex Court held that upon receipt of the Notice under
Section 34 of the Indian Income-Tax Act 1922, a claim is
made in a writ petition that the Income-Tax Officer had
no power to issue the notice and that the power is
exercised not for any legitimate purpose for which it may
be used, but for the purpose of making a fishing enquiry
and to review a previous order made in favour of the
petitioner, a rule upon the Income-Tax Officer to show
cause why the notice should not be set aside and an
opportunity to him either to accept or to deny the facts
and to set out such other material facts as have a
bearing on the question, is at least called for. The
Apex Court also observed that when the party claiming
relief challenges on oath the existence of the conditions
which confer jurisdiction, and sets out facts which may,
unless disproved, support his case an order dismissing
his petition in limine may not properly be made out.
10. In the present case, the Writ Petition was
dismissed in limine. However, the Apex Court was pleased
to remand this matter for disposal on merit. As already
observed hereinabove, this petition is of 1991. Almost
two years have passed after the remand by the Apex Court.
The matter was on board for hearing, but no attempt was
made to produce on record the reasons for issuing Notice
under Section 148 of the IT Act. No material is to be
found in the affidavit. The learned counsel appearing
for the petitioner submits that in the absence of any
material placed by the Revenue in respect of jurisdiction
of the Income Tax Officer, this Writ Petition should be
allowed. The impugned Notice should be quashed and set
aside. Our attention has also been drawn to the decision
of this Court in Devji Ravji Patel (cited supra), wherein
relying on the above decision in Madhya Pradesh
Industries Ltd., (at page 641), this Court held that
“neither the contention whether the disclosure made by
the assessee was full and true in respect of all material
facts necessary for the assessment can be determined in
the absence of an affidavit by the Income-Tax Officer,
nor the plea that the impugned notice was issued with a
collateral object could be rejected without an enquiry.”
11. The aforesaid decision squarely applies to
the present case as stated above, though affidavit has
been filed on record by the Income-Tax Officer denying
the allegations, but no material is placed on record to
justify the denial.
12. The other contention of the petitioner is
that the petitioner had disclosed all material
particulars of his income, including his status in the
return filed by him. As such there was no failure on his
part to disclose fully and truly all material facts
necessary for his assessment for the relevant year. In
this backdrop, he further submits that there is no
averment in the affidavit to assert that the escapement
is by reason of the omission or failure on the part of
the assessee to make return or to disclose fully or
truly, all material facts necessary for his assessment
for the relevant Assessment Year. He, therefore, submits
that in the absence of any averment in this behalf in the
affidavit, this Court should legitimately presume that no
reasons are recorded at least for complying with the
second condition precedent required for issuing notice
under Section 148 of the IT Act. If the existence of
these facts is challenged by the assessee before the
Court, it was obligatory on the part of the Income-Tax
Officer to satisfy the Court even on the second mandatory
requirement of the Section. In our view the submission
is well made out. No material is to be found in the
affidavit complying with this second mandatory
requirement of the Section 148 of the IT Act.
CONCLUSION
13. In view of the above this Court has no
option but to quash and set aside the impugned Notice
under Section 148 of the IT Act. We, therefore, quash
the same.
In the result, this Writ Petition is allowed.
Rule is made absolute in terms of prayer Clauses (a) and
(b) of the petition, with no order as to costs.